The Reasons Behind the Decline of Ethereum, Dogecoin, XRP, and Solana This Week
Bitcoin and most altcoins experienced a decline this week, as the crypto fear and greed index entered the fear zone. Ethereum (ETH) reached a low of $2,100, marking a 47% decrease from its highest point this year. Similarly, Dogecoin (DOGE) dropped to $0.2060, its lowest level since November 4th, while Ripple (XRP) fell to $1.8010, a 47% decline from its year-to-date high.
Other altcoins such as Solana, Polkadot, and Chainlink also suffered double-digit losses on Monday. However, many of them have since recovered some of their losses and are approaching their opening levels for the week.
The total market capitalization of cryptocurrencies, as tracked by CoinMarketCap, initially fell to $3 trillion on Monday, but later recovered to $3.3 trillion by Friday.
The broader cryptocurrency market retreated this week due to concerns about a potential trade war between the United States and its major trading partners, including China, Mexico, and Canada. Former U.S. President Donald Trump announced a 25% tariff on goods imported from Mexico and Canada, as well as a 10% tariff on Chinese imports. Although he temporarily paused tariffs on Canadian and Mexican goods for 30 days for negotiations, tariffs on Chinese imports remain in effect. If a prolonged trade war were to occur between these countries and European nations, it could lead to a risk-off sentiment, negatively impacting riskier assets such as cryptocurrencies.
Bitcoin and Ethereum ETFs experienced weak demand, contributing to the pullback of Bitcoin and altcoins. Institutional investors showed a lack of interest, resulting in net outflows for spot Bitcoin and Ethereum this week. In addition, MicroStrategy halted its Bitcoin purchases last week, after acquiring Bitcoins consistently for twelve weeks and accumulating a total of 471,000 coins.
Altcoins, including Ethereum, DOGE, XRP, and SOL, also faced declines as investor sentiment weakened. The fear and greed index dropped to 35, its lowest level since October of last year. Historically, cryptocurrencies tend to decline when fear dominates the market.
These losses occurred as the altcoin season index continued to decrease, while Bitcoin remained stable. The index declined to 33 from its year-to-date high of 47, indicating stronger demand for Bitcoin compared to altcoins.
A potential positive factor for altcoins is the formation of a hammer candlestick pattern on the weekly chart, which is a well-known bullish reversal signal characterized by a long lower shadow and a small body. Additionally, Bitcoin has formed a bullish flag pattern on the weekly chart, suggesting the possibility of a rebound.
