Crypto market returns fall into the negative, here’s why

Crypto market returns fall into the negative, here’s why

The crypto market has seen its gains over the past month wiped out in a matter of days. As the market pumped, cryptocurrencies in the space returned double-digit gains, with investor sentiment rising rapidly. However, with Bitcoin’s rejection of $25,000, the entire market experienced a rapid downtrend. Now investor sentiment has turned sour, and digital assets that enjoyed a period of growth are now in the red.

Crypto indices lose their acquired value

At the beginning of August, when the crypto market was recovering, all indexes in the universe recorded huge growth. The most prominent of these were the gains returned by the small and mid cap indices. As expected, this highly volatile asset rallied as crypto investors regained their appetite for risk.

However, as the month draws to a close and the hype surrounding the Ethereum merger subsides, the market is back in the red. For the past week, the Small Cap Index recorded the most losses, which is expected in such a market. It is currently at -85 in returns for the month. The mid-cap and large-cap index also followed suit with losses of 8%.

Bitcoin was the only one of the three that managed to hold its value a little better, though not by a huge margin. The pioneering digital asset posted a 7% loss over the same time period, all in stark contrast to the 12% overall gain seen in the crypto market in mid-August.

Crypto market losses gains | Source: Arcane Research

What is the reason?

It’s quite easy to see where the problem is coming from when you look at the market in early August compared to now. Then investors started taking more risks as prices recovered and more people became bullish.

With the recent dump, investors have been burned and are therefore less likely to take the risk. There is also the fact that this reduced appetite for risk has sent investors running to cover. So the market saw investors shifting their funds from volatile cryptocurrencies to more stable options.

Crypto market returns fall into the negative, here’s why

Total market cap at $1.022 trillion | Source: Crypto Total Market Cap on TradingView.com

The result is stablecoins that have stolen more market share from assets like Ethereum. This was the same trend that was recorded back in July before the pump. However, one difference is that there is less movement on Bitcoin than previously recorded.

Unless there is a significant increase in market sentiment, this bearish climate is expected to continue. Still, stablecoins will remain winners in such markets, with USDT, USDC, and BUSD increasing their market share over the past week by 0.77%, 0.50%, and 0.32%, respectively.

Featured image from Forkast News, charts from Arcane Research and TradingView.com

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