In the recent period, the cryptocurrency market has witnessed a consistent downward trajectory in its market cap, driven by mounting fear and uncertainty.
This shift toward bearish sentiment has sparked a chain reaction. Notably, when investors start to bet against the market, it escalates the possibility of liquidations, subsequently leading to a surge in prices, Santiment explained.
“When the crowd begins to bet against markets, it increases the likelihood of #liquidations, causing prices to rise.”– Santiment wrote.
Short squeeze alert?
Santiment’s chart reveals increased shorting activity in several well-known cryptocurrencies, including THORChain (RUNE), VeChain (VET), The Sandbox (SAND), Kava (KAVA), Binance Coin (BNB), Axie Infinity (AXS), and more.
The growing short-funding rates suggest a high level of fear, uncertainty, and doubt (FUD). In such an environment, investors are more likely to liquidate their short positions, which could ultimately lead to a ‘short squeeze.’
As more short positions are liquidated, the demand for the cryptocurrency surges, driving its price even higher.
This chain reaction can create a self-perpetuating cycle of rising prices, as panicked short sellers rush to buy and close their positions, amplifying the overall upward momentum in the market.
Total crypto market cap loses $25 billion as fear takes over
Meanwhile, crypto prices have been trending significantly lower on August 17 due to a notable shift in market sentiment. To be more specific, ‘fear’ seems to be the prevailing emotion among crypto investors, replacing greed.
As a result, the global crypto market cap fell more than 2.1% over the past 24 hours, losing more than $25 billion in market cap, according to CoinGecko.
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