Overheated phase in crypto market coming to end

[Redator]

As we can see, Bitcoin is still struggling to resume its bullish momentum. All the enthusiasm we witnessed since the end of last week and during Monday's Asian session has been completely erased today. Bitcoin has already dropped to around $107,000, sparking concern even among the most optimistic market participants. The inability of the leading cryptocurrency to return to the $116,000 area may further strengthen bearish sentiment.

The current market situation is marked by declines across all major segments: the spot market, derivatives, and ETFs. Recently, trading activity and volumes in the cryptocurrency market have been trending downward: both spot and futures trading volumes are contracting, indicating waning investor confidence. This sentiment is also reflected in the ETF market, where capital is flowing out of funds focused on crypto assets. It suggests that even institutional investors, who had previously shown interest in cryptocurrencies as an alternative asset class, are now seeking to reduce their risk exposure.

Market participants are also lowering their risk levels: the drop in open interest and funding rates indicates that traders are prioritizing protecting their capital — especially in the wake of the recent massive sell-off, during which the crypto market lost $20 billion in a single day.

Several analysts also point out the fragility in market structure: despite the recent rally, the recovery will remain shaky without a restoration of investor confidence. Caution will continue to guide market behavior. It's clear that the overheated phase is now behind us, and after the market has shed its excess leverage and speculative activity, demand could gradually return. However, until trust is restored, the market will remain in defense mode, characterized by low activity and risk aversion.

Trading recommendations

As for Bitcoin's technical picture, buyers are now focused on reclaiming the $109,300 level, which would open the way to $111,600, and from there, a short path to the $113,800 zone. The furthest target is the high near $116,300 — a breakout above this level would signal renewed strength in the bullish market. In case of a decline, buyer interest is expected around $106,700. A drop below that area could quickly push BTC down to around $103,400. The ultimate bearish target would be the $100,000 level.

As for Ethereum, a solid breakout and consolidation above $4,016 opens the door to $4,180. The furthest target is the high near $4,318 — a breakout above it would indicate a strengthening bullish trend and renewed buyer enthusiasm. In case of a drop, buyers are anticipated around $3,858. A move below this level could send ETH quickly down toward $3,717, with the final target being the $3,505 zone.

What's on the chart

• The red lines represent support and resistance levels, where price is expected to either pause or react sharply.
• The green line shows the 50-day moving average.
• The blue line is the 100-day moving average.
• The lime line is the 200-day moving average.

Price testing or crossing any of these moving averages often either halts movement or injects fresh momentum into the market.

The material has been provided by InstaForex Company - www.instaforex.com