Cryptographic analyst Ali Martinez has provided some insights into why bitcoin, ethereum, and Dogecoin prices are plummeting. The cryptocurrency market has been in decline in recent days after starting the year at a high.
Why bitcoin, ethereum and Dogecoin Prices Are Plunging
in a <a target="_blank" href="https://x.com/ali_charts/status/1878646904994562062″ rel=”nofollow” target=”_blank”>x publicationMartínez revealed why the prices of bitcoin, ethereum and Dogecoin are plummeting. He stated that capital inflows to <a target="_blank" href="https://www.newsbtc.com/news/bitcoin/bitcoin-price-to-140000-or-67000-analyst-weighs-in-on-interesting-btc-setup/” rel=”nofollow noopener” target=”_blank”>crypto market have decreased over the last month, going from $134 billion to $58 billion. The crypto analyst added that this points to a significant reduction in investment activity.
There has simply been a lack of liquidity in the cryptocurrency market, causing the prices of bitcoin, ethereum, and Dogecoin to plummet. bitcoin has led this bearish trend, falling to $92,000 after its price recovery above $100,000 at the beginning of the year. Given their strong price correlation with the flagship cryptocurrency, ethereum and Dogecoin followed suit and suffered a similar downtrend.
The lack of entries into the cryptocurrency market is likely due to the bearish sentiment among investors sparked by developments in the macro space. Recent positive US employment data dashed hopes of an imminent Federal Reserve rate cut. Instead, traders now predict there will only be one rate cut this year, probably in October.
This presents a bearish outlook for bitcoin, ethereum, and Dogecoin prices because investors are less likely to invest in these risk assets in the absence of such quantitative easing policies.
Rate cuts typically lead to a surge in liquidity, giving investors the confidence to invest in risky assets like cryptocurrencies. For context, there were three Fed rate cuts last year, which was a big boost to the cryptocurrency market. bitcoin rose above $100,000 for the first time in its history.
Other on-chain metrics also highlight bearish sentiment
There are other on-chain metrics that highlight the bearish sentiment in the cryptocurrency market and explain why the prices of bitcoin, ethereum, and Dogecoin have plummeted. In another x publication, Martínez revealed that the number of big transactions on the btc network has decreased by 51.64% over the last month, going from 33,450 to 16,180. The cryptanalyst added that this could indicate a significant reduction in whale activity.
A reduction in whale activity is bearish for bitcoin, considering how this category of investors places the flagship cryptocurrency in price discovery when they accumulate. As such, btc is destined to crash, and these whales are choosing to stay on the sidelines until market conditions improve.
Meanwhile, Martínez revealed that bitcoin network activity has fallen to its lowest level since November, with only 667,100 active addresses. This once again highlights the current bearish sentiment among investors.
Featured image created with Dall.E, chart from Tradingview.com
