Bitcoin Slumps, Cardano, Ripple Drop 5%
Bitcoin (BTC) has opened the week with a 2% decline over the last 24 hours, according to data from CoinDesk Indices. This downturn is contributing to broader market struggles, as several major cryptocurrencies, including XRP, Solana (SOL), Cardano (ADA), and Dogecoin (DOGE), witnessed drops as significant as 5%. In contrast, BNB Chain (BNB) emerged as a bright spot, recording a 3% gain.
On Sunday, Bitcoin approached a critical resistance level at $84,000, which traders identify as a pivotal point for future upward movement. As trading continued into Monday afternoon in Asia, Bitcoin hovered just above $83,300. The recent declines in the crypto market can be largely attributed to last week’s sell-off linked to U.S. tariffs and worsening macroeconomic conditions. Traders now express concerns about a potential U.S. recession, echoing sentiments of anticipated volatility as the correlation between cryptocurrency and U.S. equities remains strong.
Despite the current market difficulties, there is still some optimism for volatility in altcoins and memecoins. Trading volumes have reportedly risen for these alternative assets, fueled in part by strategic investments such as Trump’s World Liberty Financial purchasing MNT and AVAX—both subject to VanEck’s ETF application. Nick Ruck from LVRG Research highlighted this increased activity as an indicator that traders may seek higher returns from altcoins in the near term, rather than relying on larger capitals like Bitcoin or Ethereum.
The present sell-off is believed to be influenced by the unwinding of ETF and spot-linked trading strategies. Traders indicate that while large-cap equities remain somewhat insulated compared to historical norms, recent concerns surrounding economic indicators may prompt a “buy the dip” mindset as the market navigates tariff-related volatility. Augustine Fan, Head of Insights at SignalPlus, remarked on this sentiment, suggesting that hard economic data may outperform the deteriorating soft data.
The strategy employed by many hedge funds, known as multi-strategy (multi-strat) trading, employs varied tactics—including arbitrage and long-short positions—to achieve optimal returns across diverse asset classes. In Bitcoin’s context, a prevalent multi-strategy approach involves executing basis trades where funds buy spot Bitcoin (often through ETFs) while shorting Bitcoin futures to benefit from pricing differentials. However, when the profitability of these basis trades declines, either through tighter spreads or shifts in market dynamics, funds may liquidate their positions en masse, exacerbating market sell-offs.
Even with the pressures in the market, the prevailing sentiment among bullish investors leans towards a buy-the-dip outlook, anticipating recovery as market volatility associated with tariffs continues. The consensus suggests that economic fundamentals may support buying opportunities, fueling hopes for a resilient market rebalance in the months ahead.
