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The crypto market has slid into extreme fear territory following the recent price decline. According to analytics firm Alphractal, the crypto market index dropped to 28, its lowest level since April 2.
While the index has now climbed to 32, it remains in the Fear Zone, capturing the strongly bearish sentiments that have engulfed crypto investors.
Bitcoin Drops Below $110k, Drags Rest of the Market With It
The Crypto Fear & Greed dropped into the Fear Zone, following Bitcoin‘s decline below $110,000. It is the first time since early September that the flagship asset will drop that low.
Since hitting the peak around $124,000 on August 14, Bitcoin has been falling. However, a drop below $110,000 had a major impact on investors’ sentiments, likely due to the significance of the price level.
Still, there have been telling signs of a decline in BTC before now. Glassnode analysts noted that the decline is likely due to selling pressure on BTC. According to its data, long-term holders (LTH) have already realized 3.4 million BTC in profits in this cycle.
However, inflows for exchange-traded funds (ETFs) and treasury companies have helped to absorb this selling pressure. With institutional demand declining, countering LTH sell-offs was no longer sufficient.
The analysts said:
ETH Open Interest Sees Biggest Reset Since 2024 in Possible Sign of Recovery
Interestingly, the decline in Bitcoin value also affected altcoins. Major cap altcoins saw a corresponding decline in value over the past week. With ETH dropping below $4,000 and SOL going below $200, altcoins shed most of their gains from previous weeks.
However, analysts believe the decline is only a price correction and market reset. This is evident in ETH markets, where the monthly average open interest saw its biggest decline since the start of 2024.
According to CryptoQuant analyst Darkfost, the decline in open interest shows a broader market reset of an overleveraged environment.
He wrote:
The analyst added that sizable liquidations and reduced open interest could ease selling pressure. This could create the environment for the market to once again stabilize and possibly recover.
His opinion aligns with other experts who see the decline as a possible buying opportunity. Alphractal noted that Stocks Fear & Greed is at 51, which is Neutral, noting that the divergence might be an accumulation opportunity.
Swissblock also observed that despite Bitcoin losing the $110,000 level, the Risk-off Signal was never triggered. This suggests that Bitcoin might still have room for more growth.
Interestingly, BTC has already climbed above $110,000 again, causing other cryptocurrencies to trend up. However, whether this is a dead cat bounce or the market is recovering is unclear.
