Why do altcoins experience a widespread decline?

"The market is really hard to navigate," the crypto market once again welcomes the "bull market correction" version for altcoins.

On the first working day of 2024, market enthusiasm reached a new high after Bitcoin strongly broke through $45,000, but just one day later, the industry suddenly faced a long-awaited "bull market correction." On January 3, Bitcoin's price quickly fell below $42,000, with liquidations across the network increasing to $451 million in just one hour, leaving many investors who had "just fully invested" in tears. In the new week, the altcoin market was even more dismal, with most coins dropping back to their positions during last week's flash crash or even lower.

Why are altcoins falling?

Profit-taking

Recently, many altcoins have actually seen a significant increase in value, and it is possible that some funds are taking profits and withdrawing. Taking SOL as an example, according to CoinGlass data, the contract holdings of SOL on CEX have relatively decreased as we entered 2024.

As mentioned on the night of Bitcoin's price plunge, the volatility of the crypto market stems not only from the emerging and immature characteristics of the market itself but also from various factors such as regulation, technological development, and the psychology of market participants. From the perspective of retail investors, there seems to be a common expectation in the current market that the crypto market will experience a certain correction. Especially for the more volatile crypto market, history tells us that prices cannot continue to rise in one direction.

High expectations for Bitcoin spot ETF, risk aversion is mainstream

This week is a critical moment for whether the Bitcoin ETF can be approved. Yesterday, Fox Business reported that BlackRock expects its spot Bitcoin ETF to be approved on Wednesday (January 10). As a result, funds have been withdrawing from altcoins and flowing into Bitcoin. The market is also betting, with the script suggesting that "if the Bitcoin spot ETF is approved, Bitcoin will rise due to this positive news; if not, the short-term decline of altcoins will definitely exceed that of Bitcoin."

According to TradingView data, as of the time of writing, Bitcoin's market share has exceeded 54%, and the daily line is about to break into oversold territory, indicating that the overall market's risk aversion awareness is increasing. The poor performance of altcoins is a market choice, as crypto users hope to keep risks to a minimum. BlockBeats has compiled the price situation of other coins besides Bitcoin for readers' reference.

Overview of mainstream altcoin declines

Except for Ethereum, strong altcoins have all seen declines of around 10%, with most altcoins' daily RSI indicators having basically returned to normal levels during their upward trends.

ETH

As of the time of writing, the price of ETH is $2,190, with a 24-hour decline of 2.4%.

At the end of 2023, the narrative around Ethereum's Cancun upgrade began to gain momentum. Although the market is currently dominated by news of the Bitcoin spot ETF, with the continued construction of the Layer 2 ecosystem and further expansion on the agenda, Ethereum's main stage has yet to arrive.

OP

OP is the token that started the market rally in the Ethereum ecosystem. As of the time of writing, the price of OP is $3.02, with a 24-hour decline of 9.1%.

ARB

ARB once broke through $2 during the recent uptrend at the end of 2023, reaching an all-time high. As of the time of writing, the price of ARB is $1.62, with a 24-hour decline of 9.55%.

SOL

With Solana's market cap surpassing BNB, SOL's performance in this cycle has been remarkable. During last week's plunge, SOL quickly rebounded to its pre-crash price. As of the time of writing, the price of SOL is $87, with a 24-hour decline of 6.2%.

SEI

As a rising star in the public chain space, SEI experienced its largest wave of gains since its launch at the end of 2023, also prompting the market to refocus on the parallel EVM narrative. As of the time of writing, the price of SEI is $0.61, with a 24-hour decline of 8.14%.

TIA

With multiple projects airdropping tokens to TIA stakers, the price of TIA broke through $17, reaching an all-time high. As of January, the price of TIA is $12.96, with a 24-hour decline of 13%.

ORDI

As of the time of writing, the price of ORDI is $64.7, with a 24-hour decline of 9.17%.