Cryptocurrencies have diverged from American stocks, leading to substantial losses to Bitcoin and altcoin holders. Bitcoin has continued consolidating below $60,000 while the total market valuation of all coins has dropped to $2 trillion.
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This price action has led to worse performance of most altcoins. Mantra (OM), the high-yielding token, has dropped by almost 35% from its highest point this month, bringing its market valuation to over $774 million.
Cardano price has dropped in the past four consecutive weeks and moved to its lowest point since October last year. It is down by 60% from its highest level this year and by over 90% from its all-time high. Its market cap has dropped from over $90 billion to $11.6 billion.
Meanwhile, Polygon has continued falling and is hovering at its lowest swing since June 2022 while VeChain has moved to $0.022, its lowest level in November last year.
Crypto volume has sunk
The ongoing price action in the crypto industry is happening at a time when crypto volume traded in centralized and decentralized exchanges has dropped sharply lately.
Data compiled by CoinMarketCap shows that the 24-hour volume was $64 billion on Friday, down from the year-to-date high of over $151 billion and this month’s high of $129 billion. This is a sign that investors are increasingly worried about the crypto industry.
Data by DeFi Llama shows that the volume of crypto assets traded in Decentralized Exchanges (DEX) has been in a downtrend. The volume in Ethereum DEXes has dropped by over 55% in the past 7 days while Solana (SOL), Arbitrum (ARB), BNB Chain, and Base Blockchain has dropped by over 30% in the past 7 days.
The same trend is happening in the futures market, which has been relatively calm lately. Bitcoin’s open interest stood at over $29 billion on Friday, down from over $37 billion in July this year.
This performance is happening because of the heavy liquidations that happened two weeks ago when global assets tumbled. On Monday last week, the total bullish liquidations stood at over $700 million, the highest figure since April this year.
Potential catalysts for crypto
Despite the ongoing woes, analysts believe that cryptocurrencies could still stage a comeback in the next few months.
First, there are signs that the Federal Reserve will start cutting interest rates in September because of the ongoing softening of the economy.
Recent data showed that the unemployment rate was rising, and has moved to the highest level since 2021. Most analysts expect the bank to cut rates by 0.25% now that the US has published some positive jobs numbers.
The number of initial jobless claims has improved in the past two consecutive weeks. Also, the US released encouraging export and import price numbers and retail sales data on Thursday.
Bitcoin and other risky assets thrive when the Federal Reserve and other global central banks are slashing interest rates.
End of the summer season
Second, the end of the summer season could bring more investors back to the market. In most years, the summer season is usually a bit boring during the summer season and then bounce back. In 2021, Bitcoin dropped to $28,792 in June after peaking at $65,000 in May. It then bounced back to $69,000 by November.
Additionally, the US presidential election could be a catalyst for cryptocurrencies and stocks. Recent polls show that Kamala Harris has a higher chance of beating Donald Trump in this election.
Crypto investors are also of this opinion as Kamala has passed Donald Trump in a Polymarket poll with over $600 million in assets.
Analysts believe that Kamala Harris would not be a good candidate for the crypto industry. However, history shows that Bitcoin has retested a record high under both Democrats and Republicans.
Under Trump, the coin surged to a record high of over $40,000 while in Joe Biden, it moved to an all-time high of $73,800.
Therefore, Bitcoin and other altcoins could do well as the tensions of the US election ends in November.
Cardano and Polygon have lost market share
Meanwhile, the latest data shows that Cardano and Polygon have lost their market share in the crypto industry. Cardano, which was once seen as the best Ethereum alternative, has no meaningful market share in key industries.
For example, its DEX networks handled just $1.47 million in volume in the last seven days, making it the 31st biggest player in the industry. It is smaller than other chains like Gnosis, Injective, Cronos, and Sei.
Cardano has just $157 million in total value locked in the DeFi industry and just 22,830 in total addresses.
Polygon is still a big name in the crypto industry but has been overtaken by other layer-2 networks like Arbitrum, Base, and Blast. This means that its token lacks good fundamentals ahead of its rebrand from MATIC to POL.
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