This indicates that Bitcoin becomes a refuge for investors seeking safety, while altcoins transform into sources of liquidity. As a result, risk compresses prior to any expansion, a pattern consistently observed in previous cycles before altcoins regain strength.<\/p>\n
Another contributing factor to the current turmoil is tax-loss harvesting. Cryptocurrencies are one of the few major asset classes that have seen declines compared to January 1st, with equities and gold demonstrating gains.\u00a0<\/p>\n
To lock in losses before year-end, funds are actively selling off unprofitable altcoin positions, crypto exchange-traded funds (ETFs), and other high-risk assets. CyrilXBT noted that this pressure would likely dissipate as the calendar turns to the new year.<\/p>\n
Liquidity Lag And Exhausted Demand<\/h2>\n
The expert further highlighted that liquidity tends to work on a lagging basis. Although the Federal Reserve (Fed) has started to inject liquidity back into the system, markets typically do not react immediately.\u00a0<\/p>\n
Historically, improvements in liquidity occur first, followed by Bitcoin stabilizing, with altcoins lagging behind. Currently, the market remains in the lag phase, not yet experiencing the anticipated breakout.<\/p>\n
With low volatility, stagnant Bitcoin prices, and declining altcoins, CyrilXBT asserts that it evokes memories of previous cycles, such as the early 2019 and early 2023 recoveries.\u00a0<\/p>\n
Overall, the drop in the altcoin market can be attributed to several interconnected factors: rising Bitcoin dominance, peak tax-loss selling, thin liquidity, exhausted demand, and the delayed effects of macro liquidity.\u00a0<\/p>\n
Instead of a capitulation scenario, the expert suggests that this moment appears to represent compression\u2014a phase that frequently precedes significant recoveries.<\/p>\n
<\/p>\n
Featured image from DALL-E, chart from TradingView.com\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
Recent market dynamics have seen Ethereum (ETH) at the forefront of a significant decline in the altcoin sector, pushing many top cryptocurrencies below crucial price levels.\u00a0 Market expert CyrilXBT has taken to social media platform X (formerly Twitter) to unravel the factors contributing to this downturn and explore the potential for a recovery rally in…<\/p>\n","protected":false},"author":1,"featured_media":8990,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[199],"tags":[220,334,4300,1839,98,65,200,73,19,250,115,254,138,102],"class_list":["post-8989","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-breaking-news-ticker","tag-altcoin","tag-altcoin-market","tag-altcoin-prices","tag-altcoin-rally","tag-altcoins","tag-bitcoin","tag-breaking-news-ticker","tag-btc","tag-crypto","tag-crypto-market","tag-crypto-news","tag-cryptocurrency","tag-eth","tag-ethereum"],"_links":{"self":[{"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/posts\/8989","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/comments?post=8989"}],"version-history":[{"count":0,"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/posts\/8989\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/media\/8990"}],"wp:attachment":[{"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/media?parent=8989"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/categories?post=8989"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcotasks.com\/blog\/wp-json\/wp\/v2\/tags?post=8989"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}