Home Markets Crypto Market Returns Are Plunging Into Negative, Here’s Why

Crypto Market Returns Are Plunging Into Negative, Here’s Why

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Crypto Market Returns Are Plunging Into Negative, Here’s Why

The crypto market saw its returns over the past month wipe out in a matter of days. As the market swelled, cryptocurrencies in the space recorded double-digit gains, with investor sentiment rising rapidly with it. However, with the rejection of bitcoin at $25,000, the entire market had seen a rapid downward trend. Today, investor sentiment has deteriorated and digital assets that had seen the boom period are now in the red.

Crypto Indexes Lose Earned Value

In early August, when the crypto market was recovering, all indices in the space had seen phenomenal growth. Chief among these had been the gains that the small and mid cap indices had reported. As expected, these highly volatile assets had reached a high since crypto investors regained their appetite for risk.

However, as the month draws to a close and the hype around the Ethereum merger dies down, the market has slipped back into the red. Last week, the Small Cap index recorded the most losses, which is expected in such a market. It is currently at -85 in returns for the month. The Mid and Large Cap index also followed the same path with losses of 8%.

Bitcoin was the only one of the three that managed to hold its value a bit better, but not by a very large margin. The pioneering digital asset posted losses of 7% over the same period, all in stark contrast to the overall gains of 12% seen in the crypto market in mid-August.

crypto market profits

Crypto market losses gains | Source: Arcane Research

What is the reason?

It’s pretty easy to see where the problem is coming from when you look at the market in early August versus now. Back then, investors started taking bigger risks as prices rallied and more people became bullish.

With the recent discharge, investors have been burned and are therefore less likely to take risks. There is also the fact that this reduced tendency to take risks has also caused investors to hedge. Thus, the market has seen investors shift their funds from volatile cryptocurrencies to more stable options.

Total Crypto Market Cap Chart from TradingView.com

Total market cap at $1.022 trillion | Source: Crypto Total Market Cap on TradingView.com

The result was that stablecoins stole more market share from assets such as Ethereum. It was the same trend that was recorded in July before the pump. However, one difference is that there is less movement towards Bitcoin than previously recorded.

Unless market sentiment strengthens significantly, this bearish sentiment is expected to continue. Nonetheless, stablecoins will continue to be winners in these markets, with USDT, USDC, and BUSD increasing their market share last week by 0.77%, 0.50%, and 0.32%, respectively.

Featured image from Forkast News, charts from Arcane Research and TradingView.com

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