Will the Crypto Market Face a Major Crash?
Market Volatility and Crypto Performance
The crypto market experienced a significant downturn over the weekend, with Bitcoin losing $87.8 billion in market value and Ethereum shedding $46.4 billion. Despite these losses, Bitcoin remains up 77% and Dogecoin has gained 122% over the past 52 weeks. This decline appears to be more of a healthy correction following recent gains rather than the onset of a prolonged crypto winter.
Key Players in the Crypto Market
During the four-day period from Friday morning to Monday evening, several cryptocurrencies saw notable price drops. Dogecoin fell by 13.5%, while Solana took an 11% hit. Even more stable names like Ethereum and Bitcoin were not immune to the market slump. Ethereum dropped 8.5%, and Bitcoin saw a 3.8% decrease.
Ethereum’s extended weekend slide erased $46.4 billion from its total market value, which is more than the entire worth of all Dogecoin. Bitcoin’s market cap cut amounted to $87.8 billion, nearly reaching Solana’s entire value. These figures highlight the severity of the market retreat.
Causes of the Market Downturn
The broad crypto retreat was driven by two main factors. Many crypto traders cashed in profits after substantial gains in recent months. The announcement of lower Federal interest rates on Thursday boosted coin prices but also prompted some investors to sell, anticipating a temporary gain.
Additionally, the surge in sales led to numerous margin calls for crypto investors who had made bullish bets using borrowed funds. Data from the crypto options trading platform Coinglass showed a massive spike in liquidations of crypto-based options on Sunday, September 21. The volume of forced liquidation sales across various cryptocurrencies nearly set a five-year record.
Understanding the Four-Year Crypto Cycle
The crypto market has historically followed four-year cycles centered around Bitcoin halving events. This is the fourth cycle, initiated by the fourth halving of Bitcoin miner awards in April 2024. The last cycle began during the early days of the COVID-19 pandemic, leading to soaring crypto prices in 2021, followed by a crypto winter in 2022.
This downturn coincided with a large-scale inflation-fighting crisis and several economic crises within the crypto world, such as the Terra Luna stablecoin collapse and the FTX crypto exchange bankruptcy. However, this cycle may differ due to various factors, including the approval of Bitcoin ETFs in 2024 and the increasing institutional involvement in the market.
Potential Catalysts for Crypto Growth
Several factors could drive future growth in the crypto market. Institutional investors are more likely to have crypto exposure now, thanks to long operating histories and the arrival of Bitcoin or Ethereum ETFs. Corporations are also following the example of companies like MicroStrategy, which have added Bitcoin and Ethereum to their balance sheets.
Moreover, several other cryptocurrencies are expected to receive ETF approvals later this year, unless the SEC delays their approval into 2026. Additionally, Web3 applications are gaining traction, with examples like Mythical Games, the Brave web browser, and a Web3-ish travel app from American Express. If these concepts take off, demand for cryptocurrencies could soar.
Risks and Considerations
Despite the potential for growth, there are risks associated with investing in cryptocurrencies. They are still relatively new and unproven as an investable asset class. Legendary investor Warren Buffett has expressed skepticism about their value. Additionally, quantum computers could one day break the encryption that secures Ethereum and Bitcoin, prompting the need for quantum-safe algorithms.
However, these risks are long-term concerns rather than immediate threats. The weekend’s price drop can be seen as a healthy correction after an early start to the halving-inspired boom of this fourth cycle. Ethereum has still gained 54% in 52 weeks, while Bitcoin rose 77%. Dogecoin is up 122%, and Solana has seen a 49% increase in one year.
Conclusion
In the next few months, there are more reasons to be bullish than bearish about the crypto market. Unexpected price drops are part of the volatility inherent in investing in such assets. Leading coins like Bitcoin, Ethereum, and Solana should perform well in the long run, provided they can navigate the risks outlined above.
While it’s impossible to predict a massive crypto downturn, it would be a surprise in the fall of 2025. It’s too early to label this as a crypto winter or even a crypto autumn. Instead, it’s more like someone left the crypto fridge door open.
Which one are you watching, Xplorianz? Drop your take on the most underrated pick this week in the comments!. Slide into our inbox Facebook, or tag us on X . Stay sharp, stay weird, and keep Xploring
Disclaimer:
This article is for informational and entertainment purposes only and does not constitute financial advice. Always do your own research (DYOR) before making any investment decisions, your money, your call. Crypto’s wild, so stay sharp out there!
This article is for informational and entertainment purposes only and does not constitute financial advice. Always do your own research (DYOR) before making any investment decisions, your money, your call. Crypto’s wild, so stay sharp out there!
No Comments