While soaring prices and immense profits can be enticing, investors should also be cautious of potential market crashes. Identifying signs of an impending crypto market crash is crucial for protecting investments and making informed decisions. In this article, we will explore key indicators that may signal an approaching market downturn.
Overextended Bull Run
One of the primary signs that the crypto market may be heading for a crash is an overextended bull run. A bull market is characterized by sustained upward price movements, often driven by investor optimism and FOMO (Fear of Missing Out). If the market experiences an extended period of significant gains without healthy corrections, it may be an indication that a crash could be on the horizon. Historically, prolonged bullish trends have been followed by sharp corrections or bear markets.
Excessive Speculation
Speculative behavior can drive prices to unsustainable levels, leading to a potential bubble. When investors buy assets solely based on the expectation of rapid price increases, without considering the underlying value or utility of the cryptocurrencies, it can create a speculative frenzy. This behavior often precedes a market correction when reality sets in, and investors start to sell off their positions.
Unsustainable Price Growth
Rapid and unsustainable price growth is another red flag. If a particular cryptocurrency’s value increases disproportionately over a short period, it may indicate a speculative bubble rather than organic growth based on fundamentals. Such price surges are often followed by sharp declines when the market corrects itself.
Increased Volatility
Cryptocurrencies are inherently volatile, but excessive and sudden spikes in volatility can be a warning sign. Dramatic price fluctuations with no clear catalyst can be an indication of market uncertainty and potential panic among investors. High volatility can lead to massive sell-offs and trigger a cascading effect, exacerbating a market crash.
Regulatory Concerns
Regulatory developments and government interventions can significantly impact the cryptocurrency market. If there are rumors or confirmed reports of stricter regulations, bans, or crackdowns on crypto-related activities in major markets, it can lead to fear and uncertainty among investors, prompting them to sell their holdings in anticipation of adverse consequences.
Lack of Fundamental Support
A robust cryptocurrency project should have solid fundamentals, including technological innovation, a strong development team, real-world use cases, and community support. If a particular cryptocurrency lacks these essential elements and its value is solely driven by hype or market speculation, it may not sustain its growth, and a market crash could be imminent.
Media Hype and Market Sentiment
Media hype and investor sentiment play a significant role in the crypto market’s behavior. Positive news and optimistic sentiment can drive prices up, while negative news or fear-driven sentiment can lead to sharp declines. Monitoring media coverage and investor sentiment can provide insights into the market’s overall mood and potential directions.
Massive Increase in Trading Volume
A sudden and massive surge in trading volume, especially in lesser-known cryptocurrencies, can be a sign of a pump-and-dump scheme. These schemes involve artificially inflating the price of a cryptocurrency through coordinated buying before quickly selling off at a profit, leaving unsuspecting investors with substantial losses.
Conclusion
While the cryptocurrency market presents exciting opportunities for investors, it also carries significant risks, including the potential for crashes. Identifying signs of an imminent market downturn is crucial for protecting investments and making informed decisions. By keeping a close eye on factors like extended bull runs, excessive speculation, unsustainable price growth, increased volatility, regulatory concerns, lack of fundamental support, media hype, sentiment, and trading volume, investors can take proactive measures to safeguard their portfolios. Practicing risk management, diversification, and staying informed can help investors navigate the crypto market’s unpredictable terrain and minimize the impact of potential crashes.
On July 27, Optimism logged 944,000 daily transactions surpassing its competitor, Arbitrum, which registered 660,000 transactions.
Cooperation with Worldcoin and the recent Bedrock update is credited for the rise in daily transaction volume.
Optimism surpassed Arbitrum in daily transactions on July 27 for the first time since mid-January as Worldcoin got released and Bedrock update effects started being felt.
Worldcoin and Bedrock Update pushing Optimism to greater heights
Worldcoin, a new crypto asset by OpenAI’s CEO Sam Altman that is meant to be the next step in pushing proof of personhood forward as AI continues to grow, was released on July 26.
In May, Worldcoin expressed that it had committed to supporting Optimism to bring the SUperchain to life. It said it worked with Optimism to build a scalable blockchain ecosystem on OP Stack. According to that announcement, Worldcoin expressed that “As a first step, World ID, a decentralized, privacy-first identity protocol, will be available on OP Mainnet.”
Additionally, it expressed that TFH’s World App, the first wallet that allows transactions with Worldcoin and other digital assets and stablecoins, would be migrated to OP Mainnet.
In June, Optimism also received the “Bedrock” upgrade that, theoretically, cut the deposit confirmation times by 90% and lowered the involved gas fees pushing the network’s dream of being a ‘superchain’ forward. The process supposedly cut the gas fees by 40%, which aimed at attracting more users.
On July 27, Optimism logged 944,000 daily transactions surpassing its competitor, Arbitrum, which registered 660,000 transactions. This is the first instance since January 2023 where Optimism has taken the lead in daily transaction volume metrics.
Since the report that Worldcoin was working with the OP team, the daily transactions volume rose by 240% since June 1 from 277K to 944K transactions, while Arbitrum suffered a marginal dip at the same time, declining from 745K to around 660 K.
Keep watching Fintech Express for more updates on markets and other fintech-related developments.
Grayscale has asked the US SEC to consider approving all pending Bitcoin ETFs simultaneously so no company gets an advantage over the other.
The US SEC is expected to approve the first-ever BTC ETFs that offer almost direct exposure to the premiere cryptocurrency now that TradFi organizations like BlackRock have joined the race.
Grayscale, a Bitcoin ETF applicant, has asked the US SEC to consider approving all Bitcoin ETFs simultaneously to ensure no company has an advantage over the other as competition grows.
Bitcoin ETFs continue stealing the show
Bitcoin ETFs have continued to be the talk of the town as investors expect them to change the crypto market and mark a turnaround in the adoption culture of the assets. This turnaround has resulted from a growing interest from TradFi firms and other institutions.
BlackRock first disclosed that it was going into the crypto space via an application for a Bitcoin ETF. As a result, many other traditional finance institutions followed closely and filed for similar assets to keep them competitive against the company.
One of the first companies to ever apply for a Bitcoin ETF, Grayscale, has been talkative about the saga asking the US SEC to consider a simultaneous approval of the assets so no company gets approval earlier than the others. In July 27 post, the company’s Chief Legal Officer Craig Salm submitted a letter to the US SEC regarding the existing eight spot Bitcoin ETF fillings.
Grayscale added that it’s skeptical about the passing of the ETFs that have been filed with sharing agreements SSAs, with Coinbase, terming it as a “not a new idea” and saying it would be hard to meet SEC’s standards.
The SEC should approve spot #bitcoin ETFs to trade in the US. What’s more, their previous approval of bitcoin futures ETFs shows that they are already in a position to do so. Read more about the latest from our legal team: https://t.co/UC8ksqNcwy$GBTC$BTC
Further concerns on the ties with Coinbase continue as the exchange is under a lawsuit and investigation by the US SEC on violation of securities laws. However, neither the lawsuit nor the ETF applications have reached final levels of determination, which leaves most of the developments in limbo.
Keep watching Fintech Express for more updates on Bitcoin ETFs applications in the US and other Fintech-related developments.
Bitcoin has been attempting recovery today following a sharp decline about 48 hours ago.
The bitcoin market possibly reacted to a WSJ report which triggered FUD about Binance.
Are markets readying for the FOMC announcement?
Bitcoin’s recovery trial after sharp dive
Bitcoin has slightly gained a foot, recording a 0.46% price upsurge, rising from $29.130k to $29.273. The charts suggest that the markets could be poised for a short rally. However, the picture has been quite different in the past 48 hours.
The bitcoin market has been red for nearly 48 hours after recording a sharp decline on the 25th. After testing and retesting its short-term $29.679k support level, Bitcoin broke out, dropping to $28.983k.
Some traders argue that $29.5k is the most plausible retake range. Despite its strong footing in recent hours, Bitcoin will still face stiff resistance at $29.5k, $30k and $30.9k. On the downside, Bitcoin’s support levels are $28.572k and $27.997k.
Reacting to Binance FUD?
Before Bitcoin’s sharp price decline, WSJ released a news article saying, “some Binance US Crypto Trading was a mirage.” The allegations surfaced in the SEC case.
Bitcoin’s sharp decline directly coincided with the time the article was posted, implying that this FUD fueled the price plunge. Of course, the FUD offers a plausible explanation for the recent market trend.
Is Bitcoin readying for Fed announcement?
After Bitcoin’s sharp decline, some market analysts asserted that the markets are readying the FOMC announcement in the next hours. The general sentiment is that FOMC will announce massive rate hikes of 25 bps, sending US interest rates to the 5.25%-5.5% range.
FOMC meets next week (25th-26th). A 0.25% rate hike is anticipated. So far, no further hikes expected beyond July.#FED expectations per Morgan Stanley: pic.twitter.com/9aHfjUr3rv
— Just call me Gēöphph… (@capgains4life) July 21, 2023
After 10 consecutive rate hikes ranging from 25 to 50 bps, the Fed slowed down in June. However, analysts at Morgan Stanley note that the slowing jobs and inflation rise could trigger the FOMC to extend their hikes before making any rate cuts in Q1, 2024. The ongoing economic performance warrants a rate hike.
Several Fed watch tools, including investing.com and cmegroup.com, all point towards possible rate hikes. Based on investing.com, the probability of rate hikes is about 98.3%.
Ultimately, tomorrow-Friday are the important days.
Not only FOMC, but also PCE and GDP will dedicate the trend.
— Michaël van de Poppe (@CryptoMichNL) July 25, 2023
Robert F. Kennedy Jr has communicated that he intends to back the U.S. Dollar with Bitcoin if elected President.
Robert F. Kennedy has been vocal about Bitcoin, calling it a “defense against the manipulation of money supply.”
Presidential candidate Robert F. Kennedy has voiced his intentions with Bitcoin if elected President of the U.S., saying he would back the U.S. dollar with it. He added that he would also exempt Bitcoin profits from capital gains taxes.
Robert F. Kennedy continues his darling Bitcoin project
In a July 19 Heal the Divide PAC event, Presidential candidate Robert F. Kennedy expressed that he would use Bitcoin to stabilize the U.S. dollar claiming that Bitcoin is a hard currency just like Gold or Silver. He said it would be a good solution to restabilize the American economy.
“Backing dollars and U.S. debt obligations with hard assets could help restore strength back to the dollar, rein in inflation and usher in a new era of American financial stability, peace and prosperity.”
He added that the process would be gradual, starting with adjusting the amount of treasury bonds offered and backed by the currency. In a statement, he said:
“My plan would be to start very, very small; perhaps 1% of issued T-bills would be backed by hard currency, by gold, silver, platinum or Bitcoin.”
Robert F. Kennedy also expressed that he would make profits from Biutcoij exempt from capital gains taxes, explaining that it would incentivize the adoption of the currency in the country.
He previously also campaigned for the coin, saying that every citizen should be allowed to own and trade it as it is a form of defence against hawkish central banks. At the time, he tweeted saying:
“As President, I will ensure that your right to use and hold Bitcoin is inviolable. Bitcoin is not only a bulwark against totalitarianism and the manipulation of our money supply, and it points the way toward a future in which government institutions are more transparent and democratic.”
Keep watching Fintech Express for more crypto and Fintech-related developments.
The Decentralized Finance sector is performing well amid regulatory uncertainties.
DeFi tokens have shown some of the highest gains among other cryptos as regulators increase their oversight.
Decentralized Finance (DeFi) tokens have posted strong gains amid increased regulatory oversight in the past 28 days. This trend shows that people turn to decentralized finance as a hedge against centralized oversight.
DeFi tokens performs well amid regulatory uncertainties
DeFi tokens have posted strong price gains over the past month as the crypto industry battles a hungrier regulatory whip. Regulators worldwide, including but not limited to UK FCA and the US SEC, have gone after crypto strongly in June and part of July, sending shivers down investors’ spines.
However, it seems the industry has found an alternative in the Decentralized Finance sector. The decentralized finance sector is where no one controls the governance of a protocol; thus, the governments find it hard to exert their power on the industry. As such, it is not usually affected by harsh regulations, and it benefits as investors take it as a hedge against tough regulatory oversight.
Over the past month, DeFi projects have shown one of the highest gains among other categories. RocketX Exchange +226.2%, Compound +150.2%, and SmarDex +95.5% are the most significant gainers over the past 30 days. At the same time, the category’s market cap and trading volume increased by 20.8% and 123%, respectively.
Keep watching Fintech Express for more updates on DeFi and other fintech-related
