(Kitco News) – Bitcoin (BTC), altcoins, and the broader financial markets were on the mend in early trading on Tuesday following a ‘Black Monday’ that saw asset prices decline across the board in one of the worst days for markets in recent history.
“The cryptocurrency market has survived the peak of fear, finding the strength to consolidate during European trading and begin a recovery during active hours in the Americas,” said Alex Kuptsikevich, senior market analyst at FxPro. “As a result, the crypto market capitalization is up 11.3% in 24 hours to $1.98 trillion. That's still -17% in seven days.”
“Bitcoin was trading at nearly $55.7K at the start of the European session, having recovered two-thirds of Monday's loss when the price bottomed out at $49K,” he added. “The price is now close to the earlier lows.”
BTC/USD Chart by TradingView
For the optimists, Kuptsikevich noted that “the RSI attempted to move out of the oversold zone and back into the familiar range. On Monday, there was also a tempting touch and bounce from the 50-week moving average, as if to prove that we are still in a bull market.”
“However, pessimists can easily point out that a similar spike in volatility has previously preceded long selloffs, with rebounds followed by periods of new dip,” he added. “Either way, Bitcoin's momentum may remain a bellwether for global financial market sentiment, as it is the most sensitive to fluctuations in risk appetite.”
According to Shubh Varma, co-founder and CEO of Hyblock Capital, while there are encouraging signs that the worst of the sell-off is over, Bitcoin and the broader crypto market are likely to go through a period of consolidation before restarting an uptrend.
“The recent crypto market crash caught many by surprise, occurring at an unprecedented pace, largely influenced by the Nikkei, which suffered its worst day since 1987,” Varma said. “This downturn was closely tied to the yen carry trade. Notably, BTC usually shows little movement on Sundays, but this event unfolded around the Monday open (UTC). Our research highlights that the first hour on Mondays sets weekly highs and lows at a significantly higher rate.”
While the downturn prompted some traders to panic sell their tokens, others saw the sell-off as a buying opportunity.
“Despite the gradual price decline, retail investors consistently attempted to catch the bottom, particularly as the weekend approached,” Varma said. “Over the past 24 hours, retail long exposure has increased as follows:BTC: +6.46%; ETH: +3.34%; SOL: +5.03%; and DOGE: +0.98%.”
“ETH stood out, with retail long exposure ranking in the 99th percentile among major caps,” he added. “At the local bottom, we observed a significant amount of fear, followed by persistent greed, which marked the top. Interestingly, this sentiment did not waver despite the decreasing price. This pattern underscores the volatile and often irrational nature of retail trading behavior, highlighting the need for caution and informed decision-making in such turbulent markets.”
Varma said that as we move past the events of Monday, “several key metrics suggest the market may be stabilizing, potentially setting the stage for a rebound.”
“First, the global bid-ask ratio, which aggregates order book data from over 1,400 spot tickers, shows a notable shift,” he said. “For the first time in a significant period, we see a positive ratio, indicating more bids than asks. This positive sentiment is highlighted in green on [the image below]. This uptick in bids suggests growing buying interest and support at current price levels, which could provide a foundation for recovery.”
He also noted that the Fear & Greed Index is now in “extreme fear” territory for the first time in a while – a contrarian indicator that some see as an opportune time to buy.
Varma said the current behavior from retail traders suggests that Bitcoin could see a period of sideways price action as holders with less conviction sell to those who see the long-term upside.
“Retail Long % has notably decreased across major caps, indicating a shift in retail traders' behavior,” he said. “Specifically, ETH's retail long exposure has dropped to the 62nd percentile. This reduction in retail longs could signal a consolidation phase where the market is shaking out weaker hands, potentially paving the way for stronger, more sustainable growth.”
And as a positive sign that the worst of the selloff is over, Varna noted that their “Liquidation Heatmap shows that most of the liquidity has been cleared.”
“The clearing of liquidity levels typically reduces the likelihood of sharp, liquidity-driven price movements, contributing to a more stable trading environment,” he concluded.
At the time of writing, Bitcoin trades at $56,170, an increase of 3.36% on the 24-hour chart.
