Cryptocurrency Markets Experiences a Cold Spell, Risks of Volatility Amplifying
The crypto market is currently experiencing a seasonal cooling phase, a period characterized by a technical correction in the Relative Strength Index (RSI) and typical seasonal trading patterns. This phase is primarily affecting Bitcoin and Ethereum, the two leading cryptocurrencies by market capitalization.
The average daily RSI for the top 100 cryptocurrencies, including Bitcoin and Ethereum, has fallen from overbought levels above 65 down to around 55. This shift signals a momentum adjustment and is historically associated with short-term price corrections and market consolidation, rather than a structural breakdown.
Bitcoin tends to experience slower momentum in Q3 due to reduced summer trading activity, leading to a natural seasonal lull. This slowdown is typical as traders reduce activity during mid-year months.
Another contributing factor is the capital rotation from Bitcoin to altcoins. Bitcoin's market dominance has dropped from 65.1% to 61.1%, indicating early signs of capital rotation into Ethereum and other altcoins. Ethereum’s share and on-chain activity have increased, supported by strong ETF inflows and robust Total Value Locked (TVL).
The cooling phase heightens market sensitivity to macroeconomic factors, such as global monetary policies, interest rate decisions, and regulatory developments, influencing investor sentiment and capital allocation strategies.
Despite the short-term technical cooling and seasonal effects, institutional adoption continues, and developers focus on long-term infrastructure improvements in Ethereum, maintaining underlying confidence.
Elsewhere in the crypto world, the U.S. Senate unveiled a new cryptocurrency regulation proposal, and the FBI ended its investigation into Kraken co-founder Jesse Powell. Abraxas Capital's Hyperliquid losses exceeded $107 million, and increased volatility and liquidation risks are present for highly leveraged positions.
In other news, Trump announced a 50% tariff on copper imports by 2025, and there is a potential for a consolidation trend lasting until August. Suspected Ethereum staker Arthapala deposited a massive amount of ETH to a centralised exchange, and Trump criticized the Fed interest rates as a $360 billion burden.
As of now, Ethereum is priced at $3,902.18 with a market cap of $471.04 billion. Ethereum open interest surged from $14 billion to $25 billion, and institutional inflows into Ethereum ETFs remain strong. Bitcoin whales sold 500,000 BTC as institutions absorbed them. Matrixport forecasts a seasonal cooling phase in the crypto market, which often sets the stage for later recovery or altcoin rallies rather than a sustained bear market.
- Amidst the seasonal cooling phase of the crypto market, the average daily RSI for leading cryptocurrencies, such as Bitcoin and Ethereum, has declined from overbought levels, signaling a momentum adjustment and historically associated with short-term price corrections and market consolidation.
- The capital rotation from Bitcoin to altcoins, notably Ethereum, is evident as Bitcoin's market dominance has decreased while Ethereum’s share and on-chain activity have increased, supported by strong ETF inflows and robust Total Value Locked (TVL).
- Institutional adoption continues, and there is a focus on long-term infrastructure improvements in Ethereum, maintaining underlying confidence in the crypto market, despite the current short-term technical cooling and seasonal effects.
