Liquidation of various altcoins is the underlying cause
The crypto market, particularly the altcoin sector, has experienced a sharp correction in recent days, with a nearly 10% drop in the altcoin market cap and nearly $1 billion in liquidations of leveraged positions. However, analysts view this correction as a temporary market adjustment rather than the definitive end of the Altcoin Season.
The recent correction follows four consecutive weeks of strong gains in the altcoin market, which is largely interpreted as profit-taking and a natural "breather" after rapid rises, not a trend reversal. Despite steep losses in altcoins like Ethereum (-4%), XRP (-12%), and Solana, Bitcoin remained relatively stable near $117,000-$120,000, a sign of broader market consolidation instead of collapse.
Most of the liquidations (~84% of nearly $1 billion) came from long leveraged positions, indicating overenthusiastic short-term traders were caught out, a common scenario during volatile market spikes. Analysts call this a "wake-up call" for overleveraged traders and a correction aligning speculative sentiment with market reality rather than a structural breakdown.
Historical patterns suggest such corrections after strong rallies are normal and do not necessarily curtail the potential for altcoins to rally again if buying interest returns. The market capitalization of Altcoins increased by $216 billion in the last two weeks, according to analysis firm Glassnode.
While the correction reveals short-term vulnerabilities and a loss of bullish momentum, it does not conclusively signal the end of Altcoin Season but rather a phase of profit-taking and consolidation before the next market move. Investors should watch for signs of renewed momentum or extended weakness to judge if Altcoin Season has truly ended or is only pausing.
In other news, Ethereum had the highest liquidation of long positions, with over $166 million wiped out. In the last 24 hours, XRP is the biggest loser in the top 10 with a drop of 12%. Binance Coin BNB marked a new all-time high of $808 on Wednesday morning.
The volatile nature of the crypto market is encapsulated in the phrase "Just another day in crypto." Mike Cahill, CEO of Douro Labs, believes the current market situation is more complex than "what goes up must come down" and expects the crypto bull market to continue strongly at least until the end of 2025.
For investors who don't want to create a wallet, the "Bitcoin Direct ETP" and "Ethereum Direct ETP" from NxtAssets offer a simple way to invest in Bitcoin or Ethereum, similar to buying a stock. XRP reached a new all-time high just last week, breaking a seven-year record.
However, it's important to note that there is a potential conflict of interest in this article as Boersenmedien AG and nxtAssets GmbH are related parties. The open interest in Altcoins has risen to a new record high of around $45 billion since early July, including new highs for Ethereum and XRP.
Investing in Bitcoin or Ethereum through the "Bitcoin Direct ETP" or "Ethereum Direct ETP" can be learned more about on the website example.com. Bitcoin shows a slight minus of 1%. Cahill attributes the market fluctuations to profit-taking, increased selling pressure after new all-time highs in Bitcoin, stalled trade talks between the US and China, and new speculation about Fed policy.
Altcoins like Ethereum, XRP, and Dogecoin have experienced a significant drop in value. Dogecoin has a drop of over 10%, Solana drops by 9%, and Ethereum by around 4%. Over $830 million in leveraged positions were liquidated in the last 24 hours. Ethereum and Solana climbed to six-month highs.
In conclusion, while the crypto market is experiencing a correction, it is not indicative of a long-term bearish trend. Investors should remain vigilant and cautious, but the current market conditions do not necessarily signal the end of the Altcoin Season.
The recent correction in the altcoin market, primarily due to profit-taking, might provide an opportunity for investors to consider their investing strategies in altcoins like Ethereum and XRP, despite the steep losses. Historical patterns suggest that such corrections after strong rallies are normal and do not necessarily curtail the potential for altcoins to rally again if buying interest returns.
