The cryptocurrency market recently faced volatility, as Bitcoin showed a slight decline while other leading cryptocurrencies came under pressure.
Decline of Altcoins
Expectations for recovery were dashed as several prominent altcoins, such as XRP and DOGE, dropped by approximately 18% from their peaks. Solana fell by 12%. The CoinDesk 80 Index, focused on middle-tier cryptocurrencies, also recorded a 10% decline from its weekly high. Bitcoin, in turn, posted a 3% decrease, retracting to $116,000 from a weekly high of $120,000.
Indicators and Trends
Despite previously significant capital inflows into minor tokens, conditions changed. The Altcoin Season Index by CoinGlass fell from 59 to 41, indicating a wavering strength of the altcoin market. This transition followed a brief speculative surge observed in January, highlighting challenges in maintaining momentum for smaller crypto projects.
Analysts' Recommendations
Increased leveraging in altcoin derivatives trading has been a considerable factor in the downturn. David Duong, Coinbase’s Head of Research, clarified: > "Excessive use of leverage by investors led to rapid depreciation in the altcoin market." – David Duong, Coinbase Research.
Furthermore, Altcoin Open Position Dominance surged to 1.6, historically signaling potential volatility. Meanwhile, Bitcoin’s hold on the market is monitored through its dominance rate, which dipped below the 200-day moving average—an occurrence not seen since January 2025. David Duong observed: > "A sustained move below the 200-day average could be a significant sign of an altcoin season gaining strength." – David Duong, Coinbase Research.
Understanding the significant role of leverage in the crypto market can be essential for anticipating future conditions. While the possibility of an enduring altcoin season might exist, contingent on Bitcoin’s market influence and investor enthusiasm, it's advised for market participants to carefully scrutinize indicators and leverage practices to mitigate exposure to unnecessary risks.
