While the market for cryptocurrency continues to experience selling pressure, the entire market is showing signs of stability. According to CoinGlass data, 62,000 traders were liquidated during the bearish price action. In the same time frame, liquidated more than $180 million.
Battle of the bears
Massive losses have been caused by the end of bull markets and the collapses of top projects. Since the beginning of 2022, the overall performance of crypto-asset markets has been poor.
The market has been harsh on the top two cryptocurrency, Bitcoin [BTC], and Ethereum[ETH], respectively. BTC’s price has dropped by 70% from its high point, while ETH’s price has dropped by 75% from its high. Despite this, the downside risks for the former are still greater.
Price movements in cryptocurrency markets are a result of increased pressure from investors who have been buying a lot of put options.
It is possible to wonder what caused the price drop. The huge selling that was triggered by the liquidation institutions has led to the unprecedented price fall. This is the case for the largest cryptocurrency.
A medium (publishing platform blog) has been created to provide a weekly review of the crypto market.
“The derivatives market was affected by the continuous selling that was triggered by the liquidation institutions. This drove the risk aversion sentiment to stay high for a long period. One manifestation of risk aversion is the inversion of volatility surface.
The blog analysis also highlighted the ‘gamma exposure” for BTC compared to ETH.
A persistent negative gamma exposure will mean that option sellers who hedge against falling prices will experience additional selling pressure, increasing the overall risk in the crypto market.
Take a look at the graph below. BTC exposure is not easily controlled.
The blog stated that ETH exposure is controlled. This offsets the potential for additional selling pressure.
On a neutral note?
There have been patterns in the crypto market of high-level mentions of peak bearishness occurring after prices fall and before they flatten out or reverse. The bear market consciousness has dropped significantly in the last month as traders adopted a neutral tone.