Bitcoin (BTC) opened the week with a 2% decline in the last 24 hours, contributing to a broader market downturn where major cryptocurrencies dropped by as much as 5%.
On Sunday, BTC reached a resistance level of $84,000, making it a critical barrier to surpass in order to stimulate a potential upward movement. As of Monday afternoon in Asia, it was trading slightly above $83,300.
Other major cryptocurrencies, including XRP, Solana (SOL), Cardano (ADA), and dogecoin (DOGE), experienced declines of up to 5%. However, BNB Chain (BNB) managed to rise by 3%, standing out as the only gainer among major assets.
The cryptocurrency market has seen stagnation following last week’s sell-off attributed to rising U.S. tariffs and worsening macroeconomic conditions. Concerns about a potential U.S. recession are escalating due to Trump’s tariffs, and traders anticipate volatility ahead as trends remain closely linked with U.S. equities.
Nevertheless, several investors speculate that altcoins and memecoins may experience heightened activity in this flat market environment.
“After Trump’s World Liberty Financial acquired MNT and AVAX, the latter of which is included in an ETF application by VanEck, trading volumes for altcoins have surged,” remarked Nick Ruck, director at LVRG Research, in a Telegram update. “This could indicate a shift in trader and investor focus towards altcoins for potentially better returns compared to larger coins like Bitcoin or Ethereum in the near term.”
Market analysts suggest that the current downturn could be due to unwinding positions by ETF and spot-linked traders. Given that equity valuations, outside of the major large caps, are stable compared to historical averages, and fundamental economic data is expected to outperform the rapid decline in softer indicators, the general market sentiment leans towards a ‘buy the dip’ strategy as the volatility from tariffs is navigated.
“It’s widely recognized that the recent sell-off is largely driven by substantial ‘multi-strat’ hedge fund strategies that influence the macro landscape,” stated Augustine Fan, Head of Insights at SignalPlus, through a Telegram message.
Multi-strategy trades involve hedge funds employing various tactics such as arbitrage, long-short positions, and leverage to optimize yields across asset classes.
In the case of Bitcoin, a favored multi-strategy tactic is the basis trade, where funds purchase spot BTC (often via ETFs) while shorting BTC futures to exploit price discrepancies. This method helps secure low-risk profits when the spread is advantageous.
However, when profits from basis trades diminish due to narrower spreads or market shifts, funds tend to liquidate positions, leading to mass selling of Bitcoin and ETF shares. This selling pressure likely intensified the recent market decline, particularly against the backdrop of tariff-related fluctuations from the previous week.
Despite this, there remains a “buy-the-dip” attitude among market bulls.
“With equity valuations outside of the major large caps being relatively stable against historical norms and hard economic data expected to outshine the rapid drop in softer reportings, the prevailing market consensus is that it continues to be a ‘buy the dip’ environment while we address the tariff-related volatility,” Fan concluded.