Here are some viewpoints on the cryptocurrency market correction:
Reasons for the correction
- Macroeconomic policy factors: The monetary policy of the Federal Reserve significantly impacts the prices of cryptocurrencies like Bitcoin, such as 'hawkish rate cuts' leading to a sharp decline in Bitcoin prices. Furthermore, the economic policies of the newly elected President Trump have introduced uncertainty into the market, as the effects of his policies on inflation and employment will largely determine the direction of next year's monetary policy, thus impacting cryptocurrency prices.
- Market-specific factors: After a sharp rise in Bitcoin prices, long-term holders began to realize profits, leading to a profit-taking phenomenon in the market. At the same time, indicators such as the relative strength index for Bitcoin show signs of market overbought, further intensifying downward pressure. Additionally, the high leverage in the crypto market makes it more fragile, causing traders to shift to more conservative protective strategies, resulting in a significant decrease in the market's bullish-bearish sentiment index, with sentiment trending pessimistic.
- Geopolitical factors: In the past, geopolitical instability has often driven up demand for safe-haven assets like gold and Bitcoin. However, when geopolitical situations improve, such as the easing of conflicts in Lebanon and Israel, this demand significantly decreases, leading to increased selling pressure on Bitcoin and other crypto assets.
Impact of the correction
- Impact on investors: For long-term investors, if the prices of mainstream crypto assets correct to reasonable levels, it may lay the groundwork for future increases and provide strategic layout opportunities. However, for short-term investors and leveraged traders, market corrections may lead to investment losses or even trigger liquidations. For instance, during the recent market correction, coinglass data showed that 574,000 individuals were liquidated in the past 24 hours.
- Impact on industry development: On one hand, the correction may draw funding attention to some innovative and technically advanced altcoins, promoting innovation and development within the industry. On the other hand, significant market volatility and corrections may attract further attention from regulatory authorities and lead to increased regulation, which will have a profound impact on the future development of the cryptocurrency industry. Additionally, a sustained correction may lead to a decline in market confidence, affecting the overall development and promotion of cryptocurrency applications.
Market outlook
- Short-term outlook: The cryptocurrency market may continue to face pressure in the short term. Whether Bitcoin, Ethereum, and other mainstream assets can hold key support levels will have a significant impact on market confidence. At the same time, the performance of altcoins like Solana and Dogecoin may be more volatile, as these assets typically exhibit higher sensitivity during market fluctuations. Investors need to carefully assess their strategies for allocating crypto assets and closely monitor upcoming economic data to gauge the medium- to long-term trends in the market.
- Long-term outlook: Despite significant risks in the short term, institutional investors remain optimistic about the long-term prospects of Bitcoin. Some analysts predict that as blockchain technology is effectively applied and promoted in more fields, it may drive up the prices of cryptocurrencies like Bitcoin. However, the market is highly uncertain and risky, with extreme price fluctuations making accurate predictions difficult.$BTC
