Crypto Market Drop Looks More Like Consolidation Than Capitulation: Bitfinex

Last week, the crypto market was engulfed by a wave of bearish trends as the prices of top assets dropped. Bitcoin (BTC), for instance, fell below the $110,000 threshold to a market price of $108,500 during the week.

This week, the market has experienced a moderate turnaround from its downtrend, with prices rebounding. According to the latest weekly report from crypto exchange Bitfinex, the cryptocurrency market is currently consolidating rather than capitulating. For this reason, the market has remained relatively stable compared to its movement from the past week.

Why a Consolidation?

As of last week, anyone studying the market charts could easily speculate that the crypto market was en route to a capitulation. For context, a market capitulation occurs when investors rapidly sell their digital assets, even at a loss, out of fear that market prices will not recover.

However, this week’s metrics have moved Bitfinex’s analysts to believe that a market consolidation is ongoing. In its latest issue of Bitfinex Alpha, the exchange’s experts highlighted reasons behind the claim.

Consolidation occurs when the prices of crypto assets revolve around a specific range of support and resistance levels, following a significant price change. This phase is often characterized by low trading volume, indicating that investors are currently at a stage of market indecisiveness as they remain calm and wait for a price breakout or breakdown.

The Bitfinex analysts emphasized that major cryptocurrencies have undergone a similar price movement within the past week. Among the factors that fueled the sudden market movement was the aftereffect of the Federal Reserve’s rate cut on September 17.

Capital Inflow Continues

Despite the downtrend, the report revealed that investors have continued to scout for cryptocurrencies with promising returns.

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“Yet, selective rotation into speculative altcoins persisted, reflecting investorsʼ continued search for higher-beta opportunities even as total market capitalisation contracted 5.9 percent on the week to $3.7 trillion, down 12.6 percent from recent highs,” the report stated.

This continued capital inflow shows “the structural cycle of the current bull market.” The Bitfinex report highlighted that the ongoing crypto market cycle has outperformed that of the past cycle.

Alongside the increased adoption, more countries have allowed companies and investors to delve into crypto. Some governments, like the U.S., have adopted a crypto-friendly stance.