The cryptocurrency market is facing a setback, with a 3% drop in total market capitalization as Bitcoin’s price dips below $85,000. This market correction comes after a period of strong growth, particularly for large-cap altcoins that surged following Bitcoin’s brief breakout above $89,000. However, in the last 24 hours, the market has experienced significant losses, raising questions about what’s driving the downturn and what it means for Bitcoin and altcoins in the short term.

Bitcoin Price Struggles as Dominance Increases

As of today, Bitcoin is trading around $85,000, a noticeable drop from its recent highs. Despite this dip, Bitcoin’s dominance is on the rise. Bitcoin dominance refers to the percentage of the total market capitalization held by Bitcoin, and this indicator is growing stronger as the altcoin market faces losses. The rise in Bitcoin dominance signals that while Bitcoin may be experiencing a temporary correction, it is still the dominant force in the crypto space, continuing to attract investor attention.

Bitcoin’s price movement has had a direct impact on the overall market. When it spiked above $89,000 recently, many altcoins followed suit, registering gains. However, the sharp pullback to below $85,000 has led to a market-wide selloff. As of Wednesday morning, November 13, the total crypto market cap has dropped to around $3.06 trillion, down 3% from the previous day.

Why the Market is Down Today

Several factors are contributing to the current decline in crypto prices:

1. Leveraged Market Cooling Off The cryptocurrency market has seen over $2 billion in forced liquidations over the past three days, with nearly $928 million liquidated in the past 24 hours alone. Liquidations occur when traders who have used leverage to bet on price increases are forced to sell their positions when the market moves against them. This kind of forced selling can amplify downward price movements, contributing to the overall market drop.

The liquidation trend has been primarily driven by long traders—those betting that prices will continue to rise. As a result, the initial short squeeze that occurred when Bitcoin’s price surged earlier has slowed down, leading many traders to shift their focus toward a midterm correction. On platforms like Binance, more than 51% of leveraged traders are now shorting the market, reflecting a shift in sentiment away from bullish optimism.

2. Shifting Market Sentiment After a significant price surge triggered by positive news, such as Donald Trump’s victory and an increase in Bitcoin ETF inflows, the fear and greed index for both Bitcoin and Ethereum had surged into the “extreme greed” zone. This high level of greed often signals that the market may be overbought and due for a correction.

Additionally, Bitcoin ETFs, which have seen inflows of over $8.7 billion in the past four weeks, suggest that institutional interest in Bitcoin remains strong. MicroStrategy’s recent move to purchase $42 billion worth of Bitcoin also highlights institutional confidence in the crypto asset. However, this extreme optimism can often lead to a short-term pullback as traders who have been betting on continued growth take profits and reduce their exposure.

3. Midterm Market Correction Historically, every time the crypto market experiences a period of extreme optimism, such as the one we’ve seen recently, a midterm correction usually follows. This is typical in volatile markets like crypto, where rapid price movements often lead to overreaction, and the market corrects itself afterward.

Based on these trends, analysts expect Bitcoin’s dominance to remain strong for the next few months. As Bitcoin continues to outperform altcoins, its price may find crucial support between $83,250 and $85,800, where significant buying activity has been recorded. If Bitcoin holds within this range, it could stabilize and pave the way for another upward movement as we move toward the end of 2024.

What’s Next for Bitcoin and the Market?

Looking ahead, the cryptocurrency market is expected to face further volatility, with the potential for more corrections. The key level to watch for Bitcoin is the support range mentioned earlier, as it could provide stability in the event of a pullback. If Bitcoin maintains its dominance and the broader market calms down, there could be another opportunity for growth in the near future.

For altcoins, the current market conditions may be challenging, but the increasing dominance of Bitcoin highlights a shift back to the king of crypto. As traders and investors assess the market, Bitcoin’s ability to hold above crucial support levels will be crucial in determining its near-term direction.

While the recent dip may be a setback, Bitcoin’s long-term prospects remain strong, and the overall sentiment in the market is still largely optimistic.