Bitcoin Sees Declines, ADA, SOL, and XRP Fall by 5% Amid Continued ‘Buy the Dip’ Mentality
Traders say the current sell-off could have been caused by an unwinding of ETF and spot-linked traders.
Key Points
- Bitcoin started the week with a 2% drop, leading to a broader market decline where major tokens fell by up to 5%.
- The cryptocurrency market remains steady since last week’s downturn due to U.S. tariffs and recession fears.
- Despite the selling pressure, the sentiment among investors persists to ‘buy the dip’, with expectations of increased volatility and possible gains in altcoins and memecoins.
Bitcoin (BTC) began Monday in the red with a 2% decrease over the last 24 hours, according to CoinDesk Indices data, resulting in a negative impact on the overall market as major cryptocurrencies retraced by as much as 5%.
The price of Bitcoin hit resistance at $84,000 on Sunday, a significant threshold to clear for potential hikes, trading at just above $83,300 during Monday’s Asian afternoon.
Bitcoin saw some majors, including XRP, Solana (SOL), Cardano (ADA), and Dogecoin (DOGE), retreating by roughly 5%. In contrast, Binance Coin (BNB) was the only significant cryptocurrency to record gains, climbing 3%.
The crypto sector has yet to recover fully following last week’s downturn, attributed to U.S. tariff announcements and escalating concerns about a potential recession. The selling behaviors are rooted in worries around how macroeconomic shifts are influencing the crypto market.
Even so, some investors are betting on the potential volatility of altcoins and memecoins amidst a stagnant market.
Nick Ruck, director at LVRG Research, mentioned in a Telegram communication, “Trading volume has increased for altcoins after Trump’s World Liberty Financial bought MNT and AVAX,” the latter of which is part of an ETF application by VanEck. He believes this could indicate traders are focusing on altcoins short-term for better returns than larger cap coins like BTC or ETH.
Some speculate that the recent market retraction was instigated by adjustments made by ETF and spot-linked traders. Augustine Fan, Head of Insights at SignalPlus, stated in a Telegram post, “The current theory is that the ongoing sell-off stems from substantial ‘multi-strategy’ hedge fund tactics that have played a key role in the macro space.”
Multi-strategy trades involve hedge funds diversifying tactics like arbitrage and long-short moves to optimize returns across various asset categories. For Bitcoin, a common multi-strategy method is the basis trade, where funds purchase spot BTC (often through ETFs) and short BTC futures to benefit from pricing discrepancies.
When profits from these basis trades decrease due to tighter spreads, funds tend to exit these positions, leading to substantial sell-offs in Bitcoin and ETF shares. This liquidation pressure has likely amplified the recent downturn, particularly with tariff-related market fluctuations surfacing last week.
Nevertheless, the ‘buy-the-dip’ attitude continues among optimists. Fan emphasized, “Equity valuations outside of major large-caps remain relatively mild compared to historical averages, and hard economic data is expected to outperform the rapid decline in softer metrics, hence the prevailing market consensus advocates for a ‘buy-the-dip’ strategy as we navigate tariff-induced volatility.”
