Yesterday, Tuesday, October 7, a decline began in the crypto markets that is partly continuing today.
Although the picture may appear relatively simple, the explanation of the reasons behind this decline in crypto is not at all.
In fact, to understand the reasons, it is necessary to consider not only the current framework but also the historical one.
At this precise moment, the crypto market is dominated by Bitcoin.
Although the altcoin season index of CMC expresses a nearly neutral value, in reality, Bitcoin’s 59% dominance prevails over almost everything else, with rare exceptions. Therefore, the crypto market as a whole is following Bitcoin’s trend.
The most important exception is BNB, near the all-time highs recorded yesterday, but HyperLiquid is also an exception. Among the top 15 cryptocurrencies by market capitalization, excluding stablecoins, there are no other exceptions.
Therefore, the causes behind the decline of cryptocurrencies yesterday and today should not be sought in the crypto market as a whole, but specifically in Bitcoin. The altcoins, with rare exceptions, are simply following the trend of BTC.
On Wednesday, October 1st, something significant happened, which could even prove to be a real turning point, albeit only temporarily.
In fact, the inverse correlation between the price trend of Bitcoin and the Dollar Index has been interrupted.
It should be noted that this is a correlation that is particularly valid in the medium term, and that in the short (or medium-short) term it can also break, at times.
A week ago, one of those phases began where, in the short term, such correlation breaks, but that’s not really the point.
The point is that the decoupling arrived with a strong rise in the price of BTC on a day when the Dollar Index had moved little, although indeed downwards.
This decorrelation accelerated starting from the following day, when in the face of a slight rise in the Dollar Index, the price of BTC instead of correcting further increased.
Additionally, starting from Monday, the Dollar Index recorded a significant increase, with Bitcoin continuing to rise to the point of reaching new all-time highs.
Consider that compared to Friday, DXY has risen by 1%, which is significant for such an index, and instead of falling, the price of Bitcoin has increased by 10% in six days.
At that point, however, the rise temporarily halted yesterday.
Since yesterday the Dollar Index was on a clear rise, and given that the recent rise of Bitcoin was coming to an end, the reaction of its price was a brief correction.
It was a correction that lasted only one day, which brought BTC down from the all-time high of $126,000 to $120,000.
To be honest, such movements are so frequent with Bitcoin that it can’t even be strictly defined as a correction. In fact, the price of BTC yesterday merely returned to last Friday’s values.
This is confirmed by the fact that already today there has actually been a small rebound, with a return above $122,000.
Despite being within an anomaly that temporarily suspends the inverse correlation with the Dollar Index, a price movement like the one just described is nothing truly interesting, despite the drop.
For some altcoins, however, the decline turns out to be greater.
However, taking as a reference the so-called Total3, which is the overall capitalization of altcoins excluding Ethereum and Stablecoins, as well as Bitcoin, there is practically no significant decline compared to yesterday.
It is instead at -1.4% compared to Monday, which is overall still a very limited decline.
To tell the truth, yesterday the day ended with Total3 down by 2%, but even in this case, it is a very contained drop for the habits of altcoins.
This leads to the conclusion not only that the fault lies with Bitcoin, and not with the altcoins, but also that it is an absolutely physiological decline and not at all concerning, at least for now.
The real question is whether today’s small rebound will prove solid, or if further declines will occur in the coming days. And the second important issue is how long the BTC anomaly will last, given that sometimes in the past it has lasted even for several weeks, if not even a couple of months.
