It was a challenging Monday in the crypto market as the fear and greed index shifted to the fear zone of 35, leading to most tokens falling by over 20%.

Bitcoin and Major Cryptocurrencies Take a Hit

Bitcoin plunged by 17% in the past 24 hours, with other notable coins like Pepe (PEPE), Ethereum (ETH), Solana, and Notcoin performing even worse. The overall market cap of all cryptocurrencies has dropped from nearly $3 trillion in March to $1.8 trillion.

Bearish Trends in the Crypto Market

The outlook for Bitcoin and other coins appears highly bearish, with Bitcoin forming a series of lower lows and lower highs. It has even moved below the lower side of the falling broadening wedge pattern.

Technically, Bitcoin has moved below the 50-day and 200-day moving averages, indicating that bears are in complete control. Further, crypto investors have turned fearful, with the fear and greed index dropping to the fear zone of 35. Typically, cryptocurrencies tend to drop when there is a sense of fear in the market.

Additionally, crypto liquidations have soared, crossing over $1 billion on Monday. Bearish volume has also risen across the biggest crypto exchanges.

Factors Influencing the Market

This trend is happening for several reasons. One significant factor is that the Bank of Japan is moving in the opposite direction from other central banks like the Bank of England and the European Central Bank.

Further, the US presidential election is much tighter than before, and there are increasing odds that Trump will not win the election. Trump is generally seen favorably among crypto investors.

The Bullish Case for Bitcoin and Altcoins

Despite the bearish trend, a bull case can still be made in the crypto market. Goldman Sachs has raised its recession odds while the Sahm Rule index has risen to 0.53. The Sahm Rule looks at the average unemployment rate in the US over 12 months. Odds of a recession rise when the Sahm Rule moves above 0.50%. Recent data shows that it has risen to 0.53%, indicating that a recession could happen.

The Sahm Rule recession indicator surged to 0.53 in July from 0.43, suggesting the US economy is in a recession.

Ironically, stocks and cryptocurrencies tend to perform well during a recession because of the Federal Reserve’s actions. If a recession occurs, the Fed will likely cut interest rates more quickly than expected. Polymarket traders anticipate a jumbo rate cut of 0.50% in September, while some analysts foresee four cuts this year.

Such cuts would have a significant impact on the market since investors have allocated $6.1 billion in money market funds, where they are earning about 5%. When rates start falling, these investors will likely move funds to riskier assets like stocks and crypto. We saw this happen during the COVID-19 pandemic when stocks jumped after the Fed slashed interest rates to zero.

Stay updated with the latest cryptocurrency news and trends on Global Crypto News.

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