• The total market capitalization of cryptocurrencies fell by 6.6% this week, with SOL dropping 19.5% and BTC, ETH below key levels.

  • Bears cite historical patterns and BTC's decline as signs of a potential long-term downturn.

  • Others call it a bear trap, pointing to mid-cycle structure and seasonality in the fourth quarter as factors for recovery.

The cryptocurrency market has almost wiped out all its gains from early September, reversing its upward trajectory since late last week.

This drop has left analysts divided. Some argue it could be the start of a bear market, while others see it as a short-term bear trap that could quickly give way to another recovery.

Has a bear market for cryptocurrencies begun?

Data from BeInCrypto Markets showed that the total market capitalization of cryptocurrencies dropped by 6.6% over the past seven days. Most coins are in the red, following last week's Federal Reserve interest rate cut.

Top 10 cryptocurrencies performance. Source: BeInCrypto Markets

Among the top 10 coins, Solana (SOL) suffered the biggest drop, falling by 19.5%. Bitcoin (BTC) and Ethereum (ETH) also declined significantly, dipping below key support levels of $110,000 and $4,000, respectively.

The sharp sell-off drew comments from longtime cryptocurrency critic Peter Schiff, who highlighted the rise in silver amid Bitcoin's decline. He pointed out that while BTC fell, silver jumped by nearly 3%.

Schiff said, 'I have always believed that gold would be the one to pop the Bitcoin bubble. It seems that silver might be.'

Furthermore, the economist noted Ethereum's drop below $4,000, arguing that it now places ETH in a formal bear market. He predicted that Bitcoin could follow the same path soon.

Schiff added, 'We won't enter another winter for cryptocurrencies, as that would mean another spring will follow soon. Brace for an ice age for cryptocurrencies. Do you have gold?'

While Schiff's outlook is clearly negative, other analysts have also pointed to concerning signals. One analyst noted that historically, significant declines often coincide with Federal Reserve rate-cutting cycles.

He said, 'Over the past three decades, every major bear market has almost started when the Federal Reserve began cutting rates.'

Bear market predictions for cryptocurrencies. Source: X/xtrends

From a technical perspective, another analyst, PlanC, drew attention to the cost of short-term Bitcoin holders (STH), currently at $111,500. STH cost is an on-chain metric that shows the average price at which new buyers acquired their Bitcoin. This metric is widely viewed as a dividing line between bullish and bearish conditions.

The analyst stated, 'During a bull market, the price should stay above the short-term holder cost most of the time, with brief dips below it followed by quick recoveries. If the STH cost acts as a persistent resistance—where the price falls below it and gets rejected repeatedly—that's a sign of a bear market.'

Currently, BTC is already trading below this benchmark. If it fails to recover, it could signal a bear market.

Bear trap perspective

Conversely, other experts assert that the drop is a bear trap. It is a temporary decline that appears to be the beginning of a deeper drop, but instead reflects an upward trend.

An analyst emphasized that the market is still in the middle of the cycle rather than approaching its end. This leaves room for a final euphoric phase and possibly new all-time highs.

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