Crypto market returns plunge into the negative, here’s why

The crypto market has seen the returns of the past month wiped out in a matter of days. As the market pumped, cryptocurrencies in the space posted double-digit gains, and investor sentiment grew rapidly with it. However, with bitcoin’s rejection of $25,000, the entire market had seen a rapid downward trend. Now investor sentiment has worsened, and the digital assets that had enjoyed the growth period are now in the red.

Crypto indices lose accumulated value

Back in early August, when the crypto market was recovering, all indices in the area had experienced tremendous growth. The most prominent of these had been the gains returned by the small and mid cap indices. As expected, these highly volatile assets had been swinging high since crypto investors regained their risk appetite.

But as the month draws to a close and the hype surrounding the Ethereum merger dies down, the market has swung back into the red. For last week, the Small Cap index had the most losses, which is expected in such a market. It is currently at -85 in return for the month. The Mid and Large Cap index also followed the same route with 8% losses.

Bitcoin was the only one of the three that managed to hold its value slightly better, but not by a very large margin. The pioneer’s digital asset recorded losses of 7% during the same time period, all in stark contrast to the 12% overall gains seen in the crypto market in mid-August.

Crypto market losses gains | Source: Arcane Research

What is the reason?

It’s pretty easy to see where the problem is coming from when you look at the market in early August compared to now. Back then, investors began to take more risks as prices recovered and more became bullish.

With the recent dump, investors have been burned and thus less likely to take risks. There’s also the fact that this reduced appetite for risk also sent investors running for cover. So the market saw investors move their funds out of volatile cryptocurrencies to more stable alternatives.

Total market cap at $1.022 trillion | Source: Crypto Total Market Cap on TradingView.com

The result of this was stablecoins that stole more market share from assets like Ethereum. This was the same trend recorded in July before the pump. One difference, however, is that there is less movement to Bitcoin than previously recorded.

Unless there is a significant lift in market sentiment, this climate of bearish sentiment is expected to continue. Still, stablecoins will remain winners in such markets, with USDT, USDC, and BUSD gaining market share over the past week by 0.77%, 0.50%, and 0.32%, respectively.

Featured image from Forkast News, charts from Arcane Research and TradingView.com

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