This week, the crypto market had a tumultuous start. On Monday, the total market capitalization dropped by 7%, sparking over $1 billion in liquidations.
While the market participants tackle fear, CoinGecko has issued a calming perspective. The crypto data aggregator contends that the recent Bitcoin and broader crypto market dip is minor, far from signaling a severe downturn.
Crypto Market Has a History of Huge Market Corrections
CoinGecko states that this week’s market sell-off doesn’t qualify as a crypto correction, defined as a decline over 10%. Compared to the historic 39.6% crash on March 13, 2020, caused by COVID-19 fears, this movement was much smaller.
Analyzing the data, CoinGecko points out that even the largest sell-off this year — an 8.4% drop in March — did not reach the correction threshold. It highlights that since the FTX collapse in November 2022, the market has remained stable, avoiding any significant correction days.
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Historically, the crypto market has shown a pattern of quick recoveries and brief downturns. The longest corrections have lasted only two days, with merely three such instances since 2014. These short-lived declines often followed market highs or were triggered by external shocks like regulatory changes or security breaches.
The crypto market’s resilience is further highlighted by its overall performance over the past decade. Only 1.6% of the days during this period experienced “official” corrections, with the average market correction sitting at -13.0%. This figure is just above the 10% mark, demonstrating the market’s ability to rebound quickly from setbacks.
Meanwhile, the broader market sentiment continues to be fearful. The crypto fear and greed index stands at 20, suggesting extreme fear.
Experts also share this sentiment, suggesting that traders remain cautious. Markus Thielen from 10x Research points to the absence of new capital inflows, which he believes turns trading into a high-risk, zero-sum game. Recent liquidations, he notes, have significantly reduced the available leverage, urging traders to reassess their risk management strategies.
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Furthermore, Eugene Ng Ah Sio, another seasoned market analyst, draws attention to the structural weaknesses exposed by recent market actions.
“Market structure for all majors are either broken or look extremely bleak. I don’t typically want to remain aggressively long when there is this much uncertainty + weakness in the market,” Eugene Ng Ah Sio stated.
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