Crypto Market Faces Significant Downturn As Bitcoin Hits Local Bottom

According to CoinDesk, the cryptocurrency market experienced a significant decline on Tuesday, with several on-chain metrics indicating a potential bottom in bitcoin's (BTC) price. The total market capitalization of cryptocurrencies remained slightly above $2.7 trillion, reflecting a substantial decrease of nearly $1 trillion since its peak in December 2024, as per TradingView data. Various indicators suggest that the sell-off on Tuesday may have marked a local bottom for bitcoin. Andre Dragosch, Head of Research at Bitwise Europe, pointed out that the Crypto Asset Sentiment Index reached its lowest point since August. This coincided with the unwinding of the yen carry trade, which saw bitcoin's price bottoming out at approximately $49,000. Dragosch remarked, "The Crypto Asset Sentiment Index just flashed a massive contrarian buy signal for Bitcoin. Widespread bearishness across flows, on-chain data, and derivatives suggests that downside risks are fairly limited. At these prices, the risk-reward outlook appears quite favorable." On the same day, investors faced a loss of $1.8 billion, marking the largest single-day realized loss since August. This was a result of the yen carry trade unwind, which led to $3.2 billion in realized losses, according to data from Glassnode. Additionally, short-term holders, defined by Glassnode as those who have held bitcoin for less than 155 days, transferred 43,600 BTC (equivalent to $3.9 billion) to exchanges at a loss, the highest level since August 2024. These metrics are essential in identifying potential market bottoms, suggesting that bitcoin may be approaching a critical turning point.