Altcoin Season Hits Roadblock? On Wednesday, Ethereum, Ripple, and Dogecoin led the cryptocurrency market downturn, following a record high in open interest for altcoins.
After recent price surges in Ethereum, Ripple, and other cryptocurrencies, altcoins collectively experienced a significant drop on Wednesday. glassnode data shows that altcoin open interest has surged since early July, reaching a historic peak. The growth in derivatives trading may have intensified market volatility, potentially explaining the current pullback.
The cryptocurrency market's rally on Wednesday encountered resistance, with top altcoins like Ethereum, Ripple, Solana, and Dogecoin experiencing widespread declines. The broader market's plunge led to a surge in long position liquidations, with trader concerns about market bubbles spreading.
Altcoins have seen a rapid rise since July, with Ripple breaking a seven-year record last week and Ethereum and Solana reaching six-month highs. BNB, linked to Binance, had just hit a historic high of $808 before the market turned on Wednesday.
However, in the past 24 hours, most cryptocurrencies showed a downward trend. Ripple led the top ten with nearly a 10% drop to $3.22, though still maintaining an 8% weekly gain. Dogecoin fell nearly 9% to $0.241, while Solana dropped 7% to $188. In comparison, Ethereum's 3% decline (currently at $3,586) was relatively mild, and Bitcoin barely moved, dropping just 1% to $117,810.
Most users are not optimistic about Ethereum's quick rebound, with Myriad platform data showing only a 20% probability of ETH rising above $4,000 by July 25th.
Ethereum currently tops the daily liquidation list, indicating traders may have over-bet on continuing last week's surge. CoinGlass data shows over $605 million in network liquidations in the past 24 hours.
Ethereum-related positions were liquidated at $129 million in the past 24 hours, with long positions accounting for nearly $104 million. Ripple followed with $63.4 million in liquidations, and Bitcoin ranked third with $62.5 million - a contrast to its usual leading position.
Is the altcoin season ending or just beginning? Previously, Ethereum, Ripple, and other top cryptocurrencies outperformed Bitcoin (which recently hit an all-time high). As of Wednesday morning, glassnode reported a $216 billion surge in altcoin total market cap over the past two weeks.
Analysts noted: "This is one of the largest dollar-denominated increases in altcoin total market cap, providing new evidence for the continued momentum of the current altcoin season."
This wave has driven a surge in derivatives market trading volume, with altcoin open interest rising from $26 billion to a historic high of about $45 billion since early July - with Ethereum and Ripple contracts both setting new records.
Such dramatic growth suggests potential bubble signs in the altcoin market, potentially increasing volatility and explaining the market's significant oscillations.
glassnode analysts stated: "This rapid growth indicates speculative positions are accelerating, with market bubble intensity increasing. High leverage can amplify both gains and losses, making the market more reactive and susceptible to volatility impacts."
Wednesday's altcoin crash may be a manifestation of such impacts, following their previously extraordinary strong performance. However, a crypto industry executive told Decrypt that he doesn't believe this signals the end of the bull market.
Mike Cahill, CEO of blockchain infrastructure company Douro Labs, said: "The current situation is more complex than a simple 'what goes up must come down' logic. After Bitcoin's recent all-time high, profit-taking and increased selling pressure inevitably trigger market corrections."
He added: "Additionally, stalled US-China trade negotiations and new speculations about Federal Reserve policies are influencing the market. Overall, this is just a minor pullback, and I expect the crypto bull market to continue at full strength until at least the end of 2025."
