According to CoinMarketCap’s head of research, crypto is closer to the bottom than other assets.
With Terra’s collapse and Celsius Network’s financial troubles adding pressure on the crypto ecosystem of late, Alice Liu pointed out that Bitcoin had dropped 30 % in the last week alone.
To make matters worse, a spate of margin calls has drained the market of leverage.
“All these events have already allowed it to price in a high degree of negative sentiment within the crypto market,” she stated.
The overall market capitalization of all cryptocurrencies has dropped by R4.4 trillion in the last month, a 28 % drop.
Liu also mentioned how the Crypto Fear and Greed Index has dropped to 7 this week, indicating that investors are experiencing “Extreme Fear.” This is the lowest level since the World Health Organization designated coronavirus to be a pandemic in March 2020.
She also claims that the current crypto winter is distinct from the one that occurred in 2018 when BTC fell by more than 80% in less than a year.
“For the first time, crypto is going into a bear market when the global markets are also expected to go into a negative outlook… When the global economic outlook isn’t bright, it amplifies the fear in crypto. “
This “hurts crypto in two ways,” according to our analysis.
“Firstly, investors are more likely to sell and crystallize losses when they believe the market will fall further, undermining the HODLer mentality. Secondly, there is less willingness to ‘buy the dip’ at current levels when the price is expected to fall further.”
Bitcoin has so far resisted a drop below the psychologically critical R319k mark, while Ether has remained above R16k for the time being.
If these levels are lost, sell-offs may accelerate.
BTC’s 52-week low stands at R321k — just R1434 away from 320k, 2017’s all-time high.