Bitcoin and Ethereum fall below critical thresholds.

The cryptocurrency market is experiencing a downturn after a sudden reversal that wiped out most recent gains, with Bitcoin plunging below $109,000 and Ethereum dipping under $4,000.

This sell-off has left traders contending with extreme volatility, enforced liquidations, and a heightened sense of caution regarding digital assets.

FOMC Aftermath

Timothy Misir, head of research at BRN, characterized the current decline as a “post-FOMC hangover,” highlighting that Bitcoin’s price fell to as low as $108,652 during the week.

According to Misir:

“This movement cleared out highly leveraged longs and initiated a rapid repricing: volatility surged, puts were aggressively purchased, and front-end skew saw significant increases.”

It’s noteworthy that this price drop fell below BTC’s short-term holder realized price of $109,700 for the first time in five months, indicating stress among newer buyers.

Ethereum followed a similar trend, hitting its lowest point since early August. Solana dropped below $200, and the overall cryptocurrency market capitalization lost about $170 billion in 24 hours as risk aversion took hold of investors.

CryptoQuant analyst JA Maarturn noted that this recent sell-off signifies a substantial cleanup in risk-on positioning. He estimated that roughly $11.8 billion in leveraged altcoin investments and $3.2 billion in speculative Bitcoin positions have been eliminated, effectively resetting the market’s risk appetite.

What Lies Ahead?

Despite the downturn, analysts from Matrixport have indicated that the derivatives markets are sending mixed signals to crypto investors.

“Funding costs, leverage, and volumes across BTC, ETH, and SOL show both vulnerability and potential,” they mentioned, observing clustering signals around crucial on-chain thresholds that typically signal major breakouts.

They also remarked that Bitcoin is nearing the apex of a symmetrical triangle, a technical configuration that has historically led to significant movements.

However, with options traders already positioning around the pivotal $110,000 mark, any divergence from the usual seasonal volatility pattern, which typically escalates in mid-October, could trigger either an earlier breakout or a deeper correction.

They concluded:

“Emerging trends in skew, open interest, and volatility indicate that the upcoming phase of the cycle could unfold very differently from the previous one.”

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