Will Crypto Market Crash or Rebound This Black Friday?

The cryptocurrency market has faced a notable downturn, losing 5% in value over the past 48 hours. The market capitalization now stands at $3.19 trillion, marking its lowest point in five days. This crypto market crash comes as Bitcoin and other major assets witness heavy selling pressure amid global developments and Black Friday.

U.S. President Joe Biden announced that Lebanon and Israel have agreed to a U.S.-mediated proposal to end the conflict involving Hezbollah.

Meanwhile, uncertainties in traditional markets persist, driven by tariff threats from former U.S. President Donald Trump. Concurrently, the Crypto Market Fear and Greed Index has fallen to 75, its lowest in two weeks.

Bitcoin’s Overbought Conditions Trigger Crypto Market Crash

CryptoQuant data shows that the Profit and Loss (P/L) ratio for Bitcoin has reached levels comparable to its March 2024 peak of $73,400, indicating significant profit-taking by long-term holders.

Bitcoin is considered by investors as a hedge against geopolitical instability. However, Biden’s announcement of progress in the Lebanon-Israel conflict has decreased the safe-haven demand.

Source: CryptoQuant

Concurrently, a recent analysis revealed that long-term holders moved $60 billion worth of Bitcoin supply in the last 30 days, with November marking the heaviest profit-taking of this market cycle. This behavior, often observed near market tops, has increased selling pressure as retail investors absorb supply during bullish trends.

Additionally, a bearish divergence between Bitcoin’s price and the Relative Strength Index (RSI) on the daily chart signaled an overbought market, further preventing the asset from breaking through the $100,000 level.

Futures Market Reflects Rising Volatility and Downside Risks

The crypto market crash has also extended into Bitcoin futures markets, where overleveraged positions have fueled volatility. Nick Forster, founder of Derive, noted that traders are shifting toward protective strategies, as reflected by a 30% drop in the call-put skew index for Bitcoin options expiring on December 27.

“Traders are hedging against potential price declines,” Forster explained. Options data suggests a 68% chance of Bitcoin moving to $81,493 or climbing to $115,579 by late December. There is also a smaller 5% probability of extreme moves, such as a drop to $68,429 or a surge to $137,645. The impending expiration of $11.8 billion in Bitcoin options on December 27 could trigger significant price swings.

While volatility remains high, Forster noted that the seven-day and 30-day implied volatility levels for Bitcoin have remained stable at 63% and 55%, respectively. Market watchers are closely monitoring the futures market as it remains a key driver of short-term price movements.

Mixed Performance for Altcoins During the Crash

Altcoins have shown a mixed response to the ongoing crypto market crash. On the losing side, The Sandbox (SAND) dropped 12.03%, while Stellar (XLM) and Decentraland (MANA) fell by 10.07% and 8.24%, respectively. Other notable decliners included Arbitrum (ARB), Maker (MKR), and Ethereum Classic (ETC), all experiencing losses exceeding 5%.

On the other hand, some altcoins managed to gain despite the broader market sell-off. Fantom (FTM) led the gains with a 13.86% increase, followed by Sei (SEI) and Injective (INJ), which rose by 13.55% and 13.05%, respectively.

Algorand (ALGO) also saw a 10.59% rise, alongside other gainers like Sui (SUI) and Theta Network (THETA). Analysts suggest that while Bitcoin consolidates, capital may flow into select altcoins.

Will the Crypto Market Crash Stabilize or Continue Falling?

The crypto market crash has raised questions about whether the market will recover or face further declines. Michael van de Poppe, founder of MN Trading, pointed out that the market shows signs of overheating, including high volatility and a surge in margin positions.

He suggested, “The chances of a prolonged sideways phase for Bitcoin are high, although some altcoins may continue to perform well.”

Despite the short-term uncertainty, institutional investors like MicroStrategy remain bullish. Founder Michael Saylor recently announced the company’s purchase of 55,500 BTC at an average price of $97,862, bringing its total holdings to 386,700 BTC. This signals ongoing confidence in Bitcoin’s long-term potential, even as the market faces challenges.

BTC price has rebounded from the 24-hour low of $90,700. The price currently trades at $93,300 as trading volume surged amid buy-the-dip by whales.