Cryptocurrency market finally cools off
Following a significant shift in sentiment in the cryptocurrency market, the biggest cryptocurrencies in the market have entered an active correction phase, losing up to 5% of their value, and here are the potential reasons behind it, by CoinMarketCap.
Technical oversaturation of the market
Usually, the first reason behind each short-term correction after the strong pump of the market is oversaturation of the market. Whenever conditions on the market become pleasurable, traders become more active, with more purchasing power flowing into the market.
Over time, the balance between asks and offers breaks, causing spikes in volatility. Once liquidity drops and some selling pressure appears, most assets lose some of their value before rising again. In addition to technical oversaturation, traders become less stable psychologically and tend to take profits sooner than necessary.
Axie Infinity hack
One of the biggest exploits in the industry and the biggest hack of 2022 already disrupted the cryptocurrency community, which could have caused an outflow of funds from projects related to the GameFi industry, which in turn creates a panic on the market in general.
The biggest losers in the market are somehow related to the GameFi or DeFi industries, including Axie, Convex, and Kadena.
Market needs to “cool off”
In the last two weeks, a large part of the cryptocurrency market gained up to 50% to its capitalization and value, which is considered a lot even for such a volatile type of asset. It is historically and statistically proven that assets almost never go “parabolic” and gain value with no correction.
We are now witnessing the same case where most assets including Cardano, Solana, Ethereum and even Bitcoin need to calm down and gain more trading volume and funding to potentially continue their way to the top.
