After a day of massive selling pressure, bitcoin price plunged below $28,000 for the first time since January 5, 2021. On Thursday, the crypto market encountered a major wave of selling pressure led by bitcoin.
Most of the cryptos have not yet decoupled from Bitcoin. Thus, when the flagship crypto moves, the others follow. This time around, the drop in bitcoin led to a loss of $113 billion from the crypto market capitalization.
Now that bitcoin has lost the $32,000 support and the $30,000 level is under threat, many analysts believe that the BTC price may correct to retest the $24,000 support zone. One of the theories suggests that institutions considered bitcoin as a crowded trade and decided to take some profits.
Guggenheim’s chief investment officer, Scott Minerd, recently said that the BTC price has likely peaked for 2021 and may experience a retracement that will take it back to the $20,000 zone.
John Normand and Federico Manicardi, JPMorgan strategists, also warned that:
“investors using BTC as a portfolio diversifier are putting themselves at risk as Bitcoin is more of a cyclical asset than a hedge.”
That note of caution was timely given the latest show of volatility that pushed the crypto market down. Even though these sell-offs are painful for investors who had over-leveraged, taking a keen look at various social activity events that happened during the plunge highlights that the latest volatility might not be a significant macro trend change.
In exclusive comments to reporters, TheTIE analyst Erik Saberski mentioned that in the past dips in BTC price, its market dominance never changed significantly. He explained:
“This implies that earlier in the month, sell-offs were cashing out entirely, while recent BTC sell-offs are moving more into other cryptos. Looking at the daily sentiment, the same recent drops *usually* have corresponding drops in sentiment. We aren’t seeing that right now though.”
Stimulus Hopes Push Stocks Near All-Time Highs
The prospect of a wide-ranging stimulus package promised by the Joe Biden administration is currently boosting the traditional markets. NASDAQ and the S&P 500 recorded new all-time highs on January 21 and they closed up by 0.82% and 0.03% respectively. The Dow also finished the day with a 0.04% gain.
Reviewing the top-100 coins shows that CELO is the only project that recorded significant gains in the sell-off. It gained 48.87% at one point and traded at $3.37. Ether (ETH) lost 21.28% while Polkadot (DOT) dropped by 8%.
The general crypto market cap now stands at $905 billion and Bitcoin’s dominance rate is 64.6%.