The crypto market continues to extend losses across the board as prevailing selloff by institutional investors is showing no signs of abating on the back of a strong pickup in risk aversion.
As of press time, Bitcoin (BTC) is changing virtual hands at US $33,800, Ether (ETH) at US $2,100, ripple (XRP) at US $0.77, Binance Coin (BNB) US $265, cardano (ADA) at US $1.25, Dogecoin (DOGE) at US $0.29, ChainLink (Link) at US $20.36, UniSwap (UNI) at US $16.78, Polkadot (DOT) at US $17.80 and Stellar (XML) at US $0.35.
Investors and traders are growing increasingly nervous amid souring mood and negative outlook that may open up a long-lasting downward spiral, adding to the challenges facing digital asset holders in the market that has lost almost half of its capitalisation in the past week.
Analysts worry the current decline could be just a little taste of what has to come as risk averse corporate investors bank profits or jump off the sinking ship, leaving retail traders holding the bag.
Seasoned investors refer to this concept as Greater Fool Theory, which holds that the price of an asset is determined by whether you can sell it for a higher price, at a later point in time as the asset’s intrinsic value is less important than the increase in demand, however irrational it might be. The person buying the overpriced asset later on, for a higher price, is deemed the greater fool.
Crypto market has so far lost near US $1.5 trillion after China’s crackdown announcement and US Treasury’s proposal to tightly regulate cryptocurrency trading. There have been an array of risk factors with most of them still intact, indicating more losses may come this week.
The current capped upward traction due subdued buy orders indicates further market-wide losses shouldn’t be ruled out in the coming days.
However, the falling market is not necessarily bad for all traders as some benefit from the declines prices. For example, Chinese traders reportedly bagged millions of dollars from the recent crash.
Light or thin volume are also used by traders, even large institutional entities for a tactical trading strategy to influence market direction and make profit in the short-term volatility. The strategy is to trade huge volumes in an illiquid or subdued market to move the market in the desired direction, which is usually assisted by other traders in euphoria who think the market is recovering.
If evil has one power, it is the power of illusion to mask reality. And in this case, it is the lack of any good news or positive outlook to fundamentally support high prices.
However, with these ups and downs, among the lingering questions is the big one: Is this a hiccup, correction, rebalancing or the start of something worse?