Bitcoin And Altcoins Plunge : Temporary Dip Or Market Collapse ?

Cryptos Experience Vicious Volatility Amidst Economic Uncertainties

The cryptocurrency market is witnessing another episode of extreme price fluctuations, further unsettling a landscape already weakened by macroeconomic uncertainties. Solana plummeted by 14%, while XRP and Dogecoin lost over 8%, and Bitcoin dipped below $91,000. This volatility, amplified by massive liquidations, has raised questions about the resilience of digital assets in the face of global economic pressures.

Altcoin Bloodbath and Bitcoin Under Duress

The crypto market is gripped by severe turbulence. Solana (SOL) plunged by 14% in a single day, contributing to its weekly losses exceeding 20%. This plunge forms part of a broader sell-off that has also impacted XRP, Dogecoin, and Ethereum, all of which have declined by over 8%. Indeed, the CoinDesk 20 index, which tracks the top market capitalizations in the sector, reflects this downtrend with a daily decline of more than 7%.

Meanwhile, Bitcoin has dropped below $92,000 for the first time since November, potentially signaling a bearish breakout after three months of consolidating between $90,000 and $110,000. This decline has heightened tensions in the market, already battered by a lack of clear bullish signals. Jeff Mei, COO of the BTSE exchange, cautions that "the current bearish sentiment may be exaggerated," expressing optimism that forthcoming macroeconomic decisions could trigger a rebound.

Cascading Liquidations

Amidst the panic, liquidations have escalated. According to CoinGlass data, nearly $1 billion in positions have been liquidated within 24 hours. Of these, $277 million involved long positions on Bitcoin, evidencing a market caught off guard by the ferocity of the movement. Altcoins have not been spared, with chain liquidations exacerbating the downturn.

This phenomenon is not unprecedented in a crypto market frequently dominated by leverage, where liquidations naturally amplify downward movements. However, beyond the technical impact, this correction aligns with a broader economic context that weighs heavily on riskier assets.

Indeed, Bitcoin has traded within a narrow range of $90,000 to $110,000 for almost three months, struggling to regain sustainable bullish momentum. As highlighted in the Bitfinex Alpha report dated February 24, 2025, "Bitcoin remains at a critical turning point after nearly 90 days of consolidation." Moreover, Bitfinex analysts noted that "the momentum needed for a sustainable bullish break has been lacking, leading to a period of contraction and consolidation across almost all major crypto assets."

Within the past 24 hours, Bitcoin has shed over 4.5%, reaching a low of just under $91,000, its lowest level since late November, as per CoinGecko. Concurrently, the total crypto market capitalization has plunged by 8%, from over $3.31 trillion to approximately $3.09 trillion.

Correlation with Traditional Markets and Capital Flight

The downturn in cryptos cannot be attributed solely to internal factors. The crypto market is exhibiting increasing correlation with stock markets, which have also declined in recent days. The S&P 500 has lost 2.3% over the past week, while the Nasdaq has dropped by 4%, signaling growing risk aversion. This trend undermines capital flows into crypto, already suffering from waning institutional interest.

The decline in Bitcoin ETFs, which recorded net outflows of $552.5 million last week, serves as evidence. The waning institutional demand, which significantly bolstered the market in 2024, poses a significant concern for investors who had anticipated these new products to provide sustainable price support.

Inflation and Economic Uncertainties: A Hostile Environment for Cryptos

While this correction has been abrupt, it was largely anticipated. Inflationary pressures and economic slowdown have prompted a shift towards less risky assets. Augustine Fan, head of analysis at SignalPlus, emphasizes that "the sentiment of economic slowdown dominates the markets, with strengthened correlations between stocks, bonds, and cr