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The cryptocurrency market has experienced massive growth lately; in the seven days, it has steeply risen from $2.216T to $2.953T, registering one of the most aggressive weekly performances. This optimism has influenced almost all the top cryptos; in the last seven days, the Bitcoin market has seen a surge of 20.6% and the Ethereum market a rise of 13.6%. Investor confidence right now remains at its peak. However, reports suggest that it is wise to adopt a cautious approach. Why? Reports point out at least three strong signs why investors should rethink their risk management strategies. Let’s explore!
Crypto Market Overheating Amidst Parabolic Rally
At the start of this month, the market cap of the crypto market was at $2.307T. It dropped to a monthly low of $2.214T on November 4. On November 5, massive buying pressure emerged, pushing the price to a peak of $2.931T. Though the market experienced a slight drop to $2.89T on November 12, now it stands at a new all-time high level of $2.953T.
Reports suggest that the cryptocurrency market shows early signs of overheating. Notably, the RSI of Bitcoin, the largest crypto by market cap, stands at 83.88. Likewise, the RSI of Ethereum, the second largest by market cap, remains at 68.17. This indicates that both these markets are susceptible to a price correction right now.
Three Key Indicators of a Possible Crash in the Crypto Market
Meme Coin Frenzy
The meme coin market has witnessed an aggressive growth of 11.4% in the last 24 hours alone. Almost all the top meme coins have recorded massive growth during the latest crypto bull run. Dogecoin has registered an astounding rise of 107.6% in the last seven days. Shiba Inu has displayed a surge of 37.2%. Meanwhile, Pepe has witnessed an enviable growth of 117.9% in the last week. Bonk and dogwifhat have also recorded positive changes of 79.4% and 80%, respectively, during the same period.
Meme coins have no practical use and so are unpredictable. Reports highlight the unstable nature of the meme coin market rallies.
Notably, the RSI of the Dogecoin market now sits at a peak of 92.82 (in the extreme overbought zone).
Sky-High Futures Funding Rates
Reports also emphasise the threat of sky-high futures funding rates. Experts opine that elevated rates may lead to sudden sell-offs if investors start closing positions.
Extreme Greed
The crypto fear and greed index hits a reading of 88, indicating that the dominant sentiment ruling the market right now is ‘Extreme Greed’. In the past, high greed levels have led to severe market corrections. In April, a similar spike in greed led to an 18% drop in the Bitcoin market within just three weeks.
In conclusion, as the crypto market heats up, paying attention to these warning signs could be vital.