Bitcoin and Ethereum, the biggest cryptocurrencies by market capitalization, have seen their values continue to drop during the weekend as the crypto market crash continues, reaching their lowest values in months.
During the weekend, Ethereum experienced a drop of almost 25% when its value went from $2454 to as low as $1853 in early Sunday, going under the $2000 threshold for the first time since April 1st according to CoinGecko data.
On the other hand, Bitcoin experienced a similar trend when its value reached $31390 on Sunday, after having started the weekend with a $37726 valuation
The drop in value experienced by the two reigning cryptocurrencies of the crypto market is a reflection of a trend that has continued to take place over the past week as the market crash continues, with 14 of the top 15 crypto projects showing losses over the past 24 hours at the time of redaction.
Over the past days, the market capitalization of the crypto market has dropped to its lowest point since the end of February, going as low as $1.3 trillion after having surpassed the $2.5 trillion milestones during the first week of May.
The market has started seeing some recovery as of this morning though, so maybe the worst is behind us now?
What Is Causing the Crypto Crash?
Ethereum and Bitcoin have struggled to maintain the gains obtained over the past month after a rise in concerns about their environmental impact due to the use of a proof-of-work consensus algorithm, which is known to require high levels of computational powers that translate to energy requirements.
While Ethereum is planning to transition to proof-of-stake with the release of the Ethereum 2.0 update, this event is expected to occur later this year and has not been enough to dispel the concerns around the negative impact the network could have on the environment.
China’s approach to crypto also had a negative impact on the market last week when some of its financial regulators continued to enforce a ban of cryptocurrency-related activity for financial institutions in the country, as well as an announcement of higher oversight over the crypto mining industry.
News like this has resulted in a feedback loop that has maintained the market crash as more cryptocurrencies have joined the fall, which has also been experienced by futures markets and oil prices, as well as shares linked to companies involved with crypto.
As thousands of investors looked to sell their cryptocurrency holdings, Binance and Coinbase were unable to handle the increasing traffic and suffered from outages that further affected the crypto market in a negative manner.
Altcoins Can’t Decouple from Bitcoin Quick Enough
While altcoins have shown an increasing decoupling of Bitcoin over the past year, the biggest cryptocurrency by market capitalization continues to have an incredible influence over the crypto market.
According to Tradingview data, Bitcoin’s dominance has continued to drop since December 1st of 2020 when it was at 72%, going as low as 40% on May 20.
This is important as a decrease in BTC dominance would be a reflection of increasing competitiveness in the crypto market as investors find other projects to be valuable alternatives.
Ethereum had historically shown a similar trend to Bitcoin when it came to market capitalization and valuation but failed to do so during May when it reached its all-time high almost one month after Bitcoin did.
Back in 2018, Bitcoin’s crash and drop in dominance represented the start of the bear market that followed, which while unlikely to be the case this time around, will continue to influence how projects not related to BTC in any way continue to perform if a decoupling does not occur.
Altcoins’ further decoupling from Bitcoin would protect the crypto market from being easily influenced by Bitcoin, a cryptocurrency that has helped the entirety of the industry to grow.
Bitcoin has also consistently caught investor’s attention for its use for ransomware, high environmental concerns, and ensuing regulation, which has been especially noticeable in the media over the past week.