Crypto market cap falls by $113B as Bitcoin price tumbles to $28,750

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On Jan. 21 the cryptocurrency market experienced an increased wave of selling pressure and within the last hour Bitcoin (BTC) price dropped below the $30,000 mark for the first time since Jan. 4. 

BTC/USDT 4-hour chart. Source: TradingView

Now that Bitcoin has lost the $32,000 and $30,000 support, a growing number of analysts are suggesting that the price could retest the $24,000 support. One theory behind the dip suggests that institutional investors viewed Bitcoin as a crowded trade and decided to take profits.

As reported by Cointelegraph, Scott Minerd, the Guggenheim’s chief investment officer, recently suggested that the price of Bitcoin has “likely put in a top” for 2021 and could see a “retracement back toward the 20,000 level.”

JPMorgan strategists John Normand and Federico Manicardi also warned that investors using BTC “as a portfolio diversifier are putting themselves at risk” as Bitcoin is more of a cyclical asset than a hedge.

This note of caution seems to have been well timed given today’s show of volatility. Although sell-offs can be painful for investors who are overleverged, taking a closer look at some of the social activity that occurred during the downside move hints that the current volatility might not be a macro trend change.

BTC price vs. market cap dominance. Source: TheTIE

In private comments with Cointelegraph, TheTIE analyst Erik Saberski noted that during previous dips in Bitcoin price “its market cap dominance did not really change.”

Saberski said:

“This implies that earlier in the month, sell-offs were cashing out entirely, while recent BTC sell-offs are moving more into other cryptos. Looking at daily sentiment, the same recent drops *usually* have corresponding drops in sentiment. We aren’t seeing that right now though.”

BTC price vs. daily sentiment score. Source: TheTIE

Stimulus hopes keep stocks near all-time highs

The traditional markets continue to be boosted by the prospect of a wide-ranging stimulus package from the Biden administration.

The S&P 500 and NASDAQ both etched new all-time highs on Jan. 21 and closed up by 0.03% and 0.82% respectively. The Dow also closed the day with a 0.04% gain.

Daily cryptocurrency market performance. Source: Coin360

Out of the top-100 coins, the only project with notable gains was CELO, which gained $48.87% and trades at $3.37. Ether (ETH) corrected by 21.28% and Polkadot lost 8%.

The overall cryptocurrency market cap now stands at $871 billion and Bitcoin’s dominance rate is 64.3%.