Bitcoin (BTC) showed signs of stability on Wednesday morning following a dramatic drop during the late-night European trading hours. The cryptocurrency experienced a sharp decline, plummeting over 6% to as low as $58,090 before recovering somewhat. At the time of writing, Bitcoin is trading at approximately $59,800, reflecting a 5.8% decrease over the past 24 hours.
The downturn has resonated across the broader cryptocurrency market. Ethereum (ETH), the second-largest cryptocurrency by market capitalization, saw an even steeper fall of 8.2%, trading around $2,461 according to CoinGecko data. Other major cryptocurrencies were similarly affected; Solana (SOL) fell by 7.5%, Dogecoin (DOGE) by 6%, Avalanche (AVAX) by 8.5%, and Shiba Inu (SHIB) by 5.4%, signaling a widespread market correction.
The turmoil extended to the Open Network token (TON), which faced its own set of challenges. Despite resuming block production after a nearly six-hour outage, TON traded down 1.3% over the last 24 hours. The outage, reportedly triggered by a surge in transactions linked to the popular DOGS meme coin, raised concerns about the network's scalability and security.
The volatility in the crypto market comes amid broader financial discussions, particularly regarding recent comments from Federal Reserve Chair Jerome Powell. Analysts from 10x Research noted that the liquidations in the crypto market began around the $62,000 resistance level, which had been a significant barrier since August 8. The analysts suggested that market participants might have misinterpreted Powell's remarks on potential monetary easing, which could have led to excessive optimism about imminent rate cuts.
"This viewpoint oversimplifies the situation, as rate cuts do not necessarily equate to immediate stimulus," the 10x Research team cautioned. They pointed out that Powell's speech highlighted weaknesses in the labor market, signaling possible risks ahead for the economy. "Like a skilled poker player, a trader doesn't always need to go all-in with their entire position. Today's drop is intriguing and presents a potential opportunity for those looking to capitalize on a tactical rally," they added.
Meanwhile, Bitcoin's market dominance, despite recent price fluctuations, remained notable. Data from Stocklytics.com revealed that Bitcoin's dominance ratio hit nearly 60% in August, the highest since early 2021. This indicates that, despite recent volatility, Bitcoin continues to command a significant share of the cryptocurrency market.
"Bitcoin's impressive performance and a double-digit price gain have significantly impacted its dominance ratio, pushing it high above the levels seen last year," Stocklytics.com stated. This increased dominance is partly attributed to growing institutional interest, with major financial firms like BlackRock and Fidelity increasing their engagement with Bitcoin.
However, the rise in Bitcoin's dominance has come at the expense of other cryptocurrencies. Ethereum's market share has dropped from 18.1% to 14.6% over the past eight months, reflecting shifting market dynamics.
In addition to the Fed's comments, the market is also awaiting the impact of Nvidia's upcoming earnings report. According to Wedbush Securities analyst Dan Ives, Nvidia's performance could influence tech stocks broadly, with potential repercussions for the cryptocurrency market. "The stage is set for tech stocks to move higher," Ives wrote, predicting "another masterpiece quarter" from Nvidia. The report suggests that if Nvidia exceeds expectations, it could positively affect cryptocurrency prices, especially AI-related tokens.
AI-related crypto tokens have surged recently, with notable gains in tokens such as CAIR, which jumped nearly 1,288% over the past week, and VIDT DAO's token, which rose about 159%. This surge reflects the growing interest in cryptocurrencies related to AI projects and applications.
Despite Bitcoin's recent price retreat, it has still gained over 42% so far this year. The price of Bitcoin has remained above $60,000 since August 20 but has struggled to recapture its record high of $73,798 from March 14. Spot Bitcoin ETFs, including BlackRock's iShares Bitcoin Trust (IBIT), have also experienced a slight decline, reflecting broader market trends.
