Since its inception in 2009, the price of Bitcoin has seen huge fluctuations. Indicators are now pointing towards a six-figure target in this bull market. Yet other industry leaders warn that the crypto market is overheating. They warn of a crypto market crash before the next surge amid the ongoing parabolic rally.
Trading near record highs in 2024, Bitcoin is closing in on the vaunted $100,000 level as optimism in the cryptocurrency market remains strong.
Crypto Market Riding a Roller Coaster and a Potential Flash Crash Ahead?
The cryptocurrency market saw an impressive rise last week, going from $2.216 trillion to $2.953 trillion in just one week. This is one of the strongest weekly performances the market has ever seen. This surge boosted some significant cryptocurrencies: Bitcoin gained 20.6%, while Ethereum climbed 13.6% over the same period.
Investor sentiment remained optimistic, but analysts called for caution as the bullish momentum continues. Michael van de Poppe, CIO and founder of MN Capital, discussed the massive rise of Bitcoin since Trump’s election victory. He speculated that Bitcoin could hit $100,000 this week, but warned of a flash crash next week or two weeks from now to recoup liquidity on the downside.
A massive painting for #Bitcoin.
This has increased significantly since Trump was elected.
The question is: do we see $100,000 this week? We could.
We will also see a flash crash in the markets in the next 1-2 weeks, which will lead to a decline in liquidity.
Marked certain levels. pic.twitter.com/FjM0SeFGfA
– Michaël van de Poppe (@CryptoMichNL) November 14, 2024
A flash crash is a market phenomenon in which the price of an asset falls sharply over a short period of time, only to immediately rebound. However, such crashes can occur within minutes or hours of trading in the cryptocurrency market. One of the main causes of these types of sudden price changes is high-frequency trading.
Therefore, this often encompasses extreme downward movements inherent in digital currencies. Moments of strong selling pressure can forcefully lead to rapid price movements and a subsequent flash crash.
Market capitalization this month has been on a roller coaster ride. From the start of the month at $2.307 trillion to a low of $2.214 trillion on November 4. With good buying pressure on the 5th, it jumped to $2.931 trillion. After experiencing a slight local low of $2.89 trillion on November 12, the market capitalization reached an all-time high of $2.953 trillion in a short time.
What are the 3 signals indicating a correction?
Stock market crashes can be quite common in the crypto space, even during bull runs. Keeping an eye on these signals can help you anticipate potential corrections and effectively manage your risks.
Historically speaking, a few telling indicators precede the accident. Three of the most obvious ones have already emerged, such as the coin frenzy, sky-high crypto futures funding rates, and very greedy investors.
Alternative crypto investor sentiment exploded to 84, or “extreme greed,” on the Crypto Fear & Greed Index.me on Nov. 13, a day after Bitcoin surpassed its all-time high of $93,300. The last time she displayed greed this high was in April. Bitcoin saw an 18% three-week correction from $69,135 to $56,500 on May 1. This suggests that another correction could occur soon, although most analysts remain optimistic about Bitcoin’s prospects for 2025.
Bitcoin hit nearly $90,000 on November 12, following its best week since the US banking crisis earlier this year. In just one week, the cryptocurrency added more than $413 billion to its market capitalization.
According to Kris Marszalek, co-founder and CEO of Crypto.com, current leverage ratios – or the amount of funds borrowed for trading positions – are reaching unsustainable levels.
In an article on X today, November 12, Marszalek warned that leverage needs to be cleaned up before attacking $100,000. He also urged investors to manage their risks carefully.
Leverage needs to be cleaned up before tackling $100,000. Please manage your risk carefully.
-Kris | Crypto.com (@kris) November 12, 2024
CryptoQuant data showed that Bitcoin’s estimated leverage ratio across all cryptocurrency exchanges reached 0.215 on November 13, but the previous day was 0.217, a high last seen in October 2023.
How to spot the crypto crash before it happens?
Meanwhile, a series of warning shots suggest cryptocurrencies pose a risk. One such warning sign is the coin craze. Coins like Pepe have seen wild rallies – in this case, 700% before crashing. Now, some analysts are predicting that Pepe could soar more than 1,500%. Meme coins are projects that lack utility and only have speculative hype, therefore unreliable in ensuring market stability.
The reason for the caution is extremely high futures funding rates. Perpetual futures allow traders to use leverage, but rising funding rates signal unsustainable speculation. Recent extreme rates on a heat map reveal risks of sell-offs if prices fall.
The RSI heatmap flashes red with a warning. The RSI of Bitcoin and other assets indicates increased buying pressure, but when the RSI level rises above 70, it simply means that the market is overbought, and this will eventually lead to a sell-off. At the time of writing, there were around 60.
Greed is another cause for concern: the Crypto Fear and Greed Index recently reached a value of 84, describing “extreme greed” among investors. Historically, such numbers have been followed by significant market corrections, although the past may not be prologue.
All this uncertainty is further compounded by high volatility. High volatility often signals that the market is preparing for a big move, but is also at risk of rapid corrections. The Bollinger Bandwidth percentile indicator shows increased volatility, suggesting that the market is primed for a sharp decline. For now, realized volatility is around 50%.
Even though he’s anti-crypto, it might be wise to follow old-school investor Warren Buffett’s advice: “Be fearful when others are greedy, and be greedy when others are fearful.” »
Teuta Franjkovic
Teuta is a seasoned writer and editor with over 15 years of experience in the macroeconomics, technology, and cryptocurrency and blockchain industries. Starting her career in 2005 as a lifestyle writer for Cosmopolitan, she expanded to covering business and economics for several reputable publications like Forbes and Bloomberg. Influenced by the likes of Don and Alex Tapscott and Laura Shin, Teuta embraced the blockchain revolution, believing cryptography to be one of humanity’s most crucial inventions. His involvement in fintech began in 2014, focusing on crypto, blockchain, NFTs and Web3. Known for her excellent teamwork and communication skills, Teuta holds a dual master’s degree in political science and law.
Disclaimer: Content presented may include the author’s personal opinion and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.
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