Are small capital crypto assets returning a sign that risk appetite is returning?

Are small capital crypto assets returning a sign that risk appetite is returning?

The crypto market has just experienced a slight recovery, but performance is upside down. Contrary to the way sales usually take place, the dominance of bitcoin has dropped dramatically as assets are below the Small Cap index.

Since last year’s November market capitalization of $ 3 trillion, the crypto market has now fallen to about $ 800 billion:

Total market capitalization of cryptocurrencies fell to $ 879.871 billion on the daily chart | Source:

Smaller altcoins are making a strong comeback

Last week the crypto market hit bottom, and now some are following it mild recovery. According to per Arcane Research’s latest weekly reportsmaller altcoins also saw red numbers with the Small Cap index falling 27%, but it did the best performer as a whole.

In contrast, Bitcoin fell 35%. Through this small window of relief during June, we saw that the coin with the blue chips was weaker than all the other indices.

Are small capital crypto assets returning a sign that risk appetite is returning?
Bitcoin is worse than all crypto indices in June Source: Arcane Research

As a result, BTC’s market dominance fell -1.51% this week to 43.5%, while Ether fell -0.31%. The latter has been declining since May from 19.5% to 15%.

Are small capital crypto assets returning a sign that risk appetite is returning?
Bitcoin dominance declines sharply as altcoins take the lead Source: Arcane Research

What makes this crypto winter colder

The report states that the main driver of this crypto crash was the collapse of the hedge fund Three Arrow Capital (3AC). After investing more than $ 200 million in Luna Foundation Guard token sales, 3AC’s liquidity was eventually wiped out, and its call for margin was the last straw that spilled the glass for a market that was already under pressure.

Related Reading | How long will CryptoWinter last? Founder Cardano provides answers

According to Wall Street Journal, a crypto hedge fund has hired legal and financial advisors to help find solutions for its investors and lenders. The firm seeks a way out, “including the sale of property and rescue by another firm.” The forecast is not very positive at the moment, given the wave of liquidations and loss mitigation by crypto exchanges that followed the collapse.

“We weren’t the first to be affected … All of this is part of the same contagion that has affected many other firms,” Kyle Davies, co-founder of 3AC, said in an interview.

Arcane Research explained that “In periods of insolvency, creditors first release the most liquid assets, which is probably the root cause of the relative weakening of BTC and ETH over the past week.”

The report adds that “illiquid altcoins are harder to sell in large quantities, especially in times of pressure, which explains why smaller coins have experienced less excessive sales pressure in the past week.”

Meanwhile, Microstrategy CEO Michael Saylor described events around this winter as a “horror parade” in which the consequences of a lack of regulation in the crypto field allowed the laundering trade and cross-collateralized altcoins to be loaded with Bitcoin.

“What you have is a cloud of $ 400 billion of opaque, unregistered securities that are traded without full and fair disclosure, and they are all collateralized with Bitcoin.

“The general public should not buy unregistered securities from wild bankers who might or may not be there next Thursday,” Saylor added, criticizing recent collapses and suggesting future regulatory actions could prevent the level of volatility that BTC is now experiencing. .

Related Reading | Crypto investors find security in stable coins, bitcoins, massively reject altcoins

Source link

Leave a Reply