Bearish Crypto Market Sends Investors Back to Stablecoins
The crypto market sees another week in the red with Bitcoin, Ethereum and major cryptocurrencies trading to the downside over the past 7 days. The general sentiment in the market is turning bearish as the nascent asset class completed a major milestone with “The Merge”.
At the time of writing, Bitcoin and Ethereum are recording a loss of 15% and 21% in the last week. In crypto top 10 by market cap, the second cryptocurrency shows the worst performance followed by Polkadot (DOT) and Solana (SOL) with around 15% loss in the same period.
Crypto Market Takes Shelter from Ethereum Fallout
According to data from Arcane Research, the crypto market is moving in line with its previous performance in September. This month has been historically bad for the nascent asset class, and this year the trend will continue.
As shown in the chart below, Arcane Research’s large, mid and small indices have experienced negative performance alongside Bitcoin. The number one cryptocurrency by market capitalization is moving into red territory, but outperforming the research firm’s small- and large-cap index.
On the latter, only XRP has started to show bullish momentum with 14% and 9% gains respectively in the last week and 24 hours. The fourth cryptocurrency in terms of market capitalization, not counting stablecoins, looks set to benefit from a potential deal between Ripple and the US Securities and Exchange Commission (SEC).
While XRP may save some of its profits for major-cap cryptocurrencies, Ethereum (ETH) is moving in the opposite direction following “The Merge,” the event that completed the transition to Proof-of-Stake (PoS). As expected by many in the crypto market, this event was a “sell the news” milestone.
The negative performance after “The Merge” has pushed the crypto market back to critical support levels. Arcane Research noted:
We saw a slight decline (in the performance of the crypto indices after a rally) before the merger as some traders tried to lead a potential sell-the-news event. It turned out that these traders were right as all indices continued to fall after the merger.
Fear is growing in the crypto market
As a consequence, traders are switching their money into stablecoins, such as Tether (USDT) and USD Coin (USDC) to protect themselves from further downside. This has led to a migration of market share from Bitcoin and Ethereum to these digital assets.
As the stablecoin’s market capitalization increases, the fear and greed index crashes to extreme levels of fear. Arcane Research noted the following about the recent crypto market crash and its impact on general sentiment and stablecoins:
Over the past seven days, the total crypto market capitalization has fallen by 11%. At the same time, the combined market capitalization of the three largest stablecoins has held, ultimately increasing their market dominance.
