analysis <\/a>by addressing the role of Bitcoin (BTC) dominance in the market. When Bitcoin\u2019s dominance increases, capital tends to concentrate within the asset rather than exiting the broader cryptocurrency market.\u00a0<\/p>\nThis indicates that Bitcoin becomes a refuge for investors seeking safety, while altcoins transform into sources of liquidity. As a result, risk compresses prior to any expansion, a pattern consistently observed in previous cycles before altcoins regain strength.<\/p>\n
Another contributing factor to the current turmoil is tax-loss harvesting. Cryptocurrencies are one of the few major asset classes that have seen declines compared to January 1st, with equities and gold demonstrating gains.\u00a0<\/p>\n
To lock in losses before year-end, funds are actively selling off unprofitable altcoin positions, crypto exchange-traded funds (ETFs), and other high-risk assets. CyrilXBT noted that this pressure would likely dissipate as the calendar turns to the new year.<\/p>\n
Liquidity Lag And Exhausted Demand<\/h2>\n
The expert further highlighted that liquidity tends to work on a lagging basis. Although the Federal Reserve (Fed) has started to inject liquidity back into the system, markets typically do not react immediately.\u00a0<\/p>\n
Historically, improvements in liquidity occur first, followed by Bitcoin stabilizing, with altcoins lagging behind. Currently, the market remains in the lag phase, not yet experiencing the anticipated breakout.<\/p>\n
With low volatility, stagnant Bitcoin prices, and declining altcoins, CyrilXBT asserts that it evokes memories of previous cycles, such as the early 2019 and early 2023 recoveries.\u00a0<\/p>\n
Overall, the drop in the altcoin market can be attributed to several interconnected factors: rising Bitcoin dominance, peak tax-loss selling, thin liquidity, exhausted demand, and the delayed effects of macro liquidity.\u00a0<\/p>\n
Instead of a capitulation scenario, the expert suggests that this moment appears to represent compression\u2014a phase that frequently precedes significant recoveries.<\/p>\n
Featured image from DALL-E, chart from TradingView.com\u00a0<\/p>","protected":false},"excerpt":{"rendered":"
Recent market dynamics have seen Ethereum (ETH) at the forefront of a significant decline in the altcoin sector, pushing many top cryptocurrencies below crucial price levels.\u00a0 Market expert CyrilXBT has taken to social media platform X (formerly Twitter) to unravel the factors contributing to this downturn and explore the potential for a recovery rally in […]<\/p>\n","protected":false},"author":0,"featured_media":122925,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-122924","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-discovery"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/122924"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=122924"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/122924\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/media\/122925"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=122924"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=122924"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=122924"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}