Summary of this article
Crypto market cap has wiped out $820 billion in a month
What went wrong? what does it mean?
Analysts say fall in crypto part of broad-based selloff
Cryptocurrencies as a topic often lead to investors recounting stories of both significant losses and gains. While the big boom in the crypto market attracted investors, many are now looking for a safer ground during market tremors.
On November 21, Bitcoin plunged to a seven-month low amid a broad market unwinding on investors’ worries over lofty valuations in tech stocks and lack of clarity around near-term rate cuts in the US. Bitcoin traded at $83,944 on November 22, down over 12.2 per cent in a week.
From crypto whales to small investors, the latest declines in crypto assets have hit all. Some market participants say the recent trend of declines in the market will die out, while most remain worried about the breach in technical levels and the overall health of the economy which could fade out the value of riskier assets like cryptocurrencies.
Why are crypto assets falling?
Crypto assets are viewed as a barometer for risk appetite in the market. The sentiment of the market turned fragile due to fears of an overall slowdown in the US economy and rising debt, along with uncertainty around trade and tariffs. Amid this volatility markets, and investors have flocked to safe-haven assets such as gold and silver.
Along with this, fears of a correction due to frothy stock valuations, especially in AI stocks have also led to sell-off in global markets. The combination of these factors has led to investors exiting their positions in crypto-assets.
However, the fall has not been continuous. Crypto prices have regained some ground after chances of rate cut by the US Federal Reserve increased amid continued macroeconomic uncertainty due to elevated inflation levels in the US.
Vikas Gupta the Country Manager of Bybit India, the Indian arm of a global cryptocurrency exchange platform highlighted that early indications suggest that the rebound in crypto prices is still weak.
”Traders were hoping for a strong recovery, but early indications suggest that the rebound is still weak, with BTC struggling to establish firm ground,” Gupta said.
Gupta added that major outflows were recorded in the ETFs of cryptocurrencies such as Bitcoin and Ethereum.
“In just one week, U.S. spot Bitcoin ETFs recorded outflows of around $1.2 billion, while Ethereum ETF products saw withdrawals of about $508 million,” Gupta added.
What Does It Mean For Investors
The uncertainty in global markets can induce foreign portfolio investors to shift to other markets giving higher returns. However, the spillover of a slowdown in the US economy and lack of clarity around tariff impositions on India have turned domestic stocks volatile. This has made domestic and foreign investors cautious of increasing their bets in crypto currency.
“Ethereum remains under heavy pressure after sliding below $2,700. Immediate support sits at $2,600, followed by $2,450. ETH must regain $2,800 to stabilize; otherwise, a drop toward $2,300 remains on the table as broader trend indicators stay bearish,” Riya Sehgal, Research Analyst, Delta Exchange said.
Analysts said while investors will likely watch out for any further declines from technical levels, crypto currency prices are expected to stabilize after the recent bout of profit booking.
”Investors are advised to exercise caution and avoid making aggressive, emotion-driven decisions. A measured approach, focused on risk management and long-term strategy, remains critical as markets react to ongoing economic signals. The key psychological level to watch is $80,000. Historically, strong support zones tend to attract buying interest,” said Ashish Singhal, Co-founder, CoinSwitch.
