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Following the crypto flash crash, Ethereum holds its footing as Polygon soars.

As the first week of December draws to a close, market sentiment in the cryptocurrency market has turned from greed to extreme anxiety, as the market leader Bitcoin (BTC) fell by 26% over the weekend, contrary to expectations. Etheruem and other big cryptocurrencies have lost more than 20% in response to the BTC price action. The overall market capitalization of cryptocurrency is presently $2.4 trillion (as of 5 pm IST). As we enter the final weeks of 2021, we explore the reasons for the Bitcoin meltdown, the present situation of the market, and what we can expect in the near future.

BTC has experienced a brief outage.

After briefly flirting with $59,000 on December 1, BTC took a sharp reversal and fell all the way below $42,000. Excess leverage in the crypto markets is thought to be the cause of this drop.

Leverage is an investment idea that allows you to boost your purchasing power without increasing your original trading amount. Although it is generally done by experienced traders, it is largely used to improve prospective returns. When a market is over-leveraged, it indicates there is a lot of debt in the system that is used for trading.

The BTC market, which is often seen as “healthy” by crypto specialists, flushes off excess leverage by liquidating all of the traders’ holdings, which usually results in a cascading effect as stop losses are filled, resulting in a flash crash.

BTC, on the other hand, recovered fast as long-term investors jumped in near $42,000, pushing it beyond $50,000 in the previous three days. However, BTC is vulnerable to severe volatility until it reclaims the $52,000-$53,000 range. For the time being, BTC will be supported between $48,000 and $50,000. Bitcoin is currently trading about $51,400, up 8% in the last 24 hours.

While Ethereum struggles, Polygon soars.

Ethereum (ETH), the second most valuable cryptocurrency, was no exception to BTC’s volatility, falling more than 20% to $3,500. ETH, on the other hand, recovered faster than the rest of the market, reclaiming the key psychological threshold of $4,000 on the same day. With a gain of 11.3 percent in the previous 24 hours, ETH is currently trading near $4,400.

While Ethereum struggles, Polygon soars.

Ethereum (ETH), the second most valuable cryptocurrency, was no exception to BTC’s volatility, falling more than 20% to $3,500. ETH, on the other hand, recovered faster than the rest of the market, reclaiming the key psychological threshold of $4,000 on the same day. With a gain of 11.3 percent in the previous 24 hours, ETH is currently trading near $4,400. ETH has demonstrated significant strength/resistance against BTC during the correction, demonstrating strong network effects created around the DeFi ecosystem.

Polygon (MATIC), a layer 2 on the Ethereum network, has increased by more than 30% in the last day to $2.33. This price movement can be attributable to news that venture capital firms such as Sequoia Capital India and Steadview Capital are preparing to invest $50-$150 million in the Polygon network by purchasing MATIC tokens.

With BTC leading the way, all of the top 20 altcoins by market capitalization have gained more than 10%, with the exception of Binance Coin (BNB), which has gained a modest 8%. With a market cap of $12 billion USD, Solana (SOL) has surpassed Cardano (ADA) to take fifth place. However, ADA has increased by 16 percent over the previous day when SundaeSwap, Cardano’s first fully functional decentralised exchange (DEX), released its public testnet, with the mainnet expected to launch in the following weeks.

BTC’s short-term prospects

Because the flash crash reset the excess leverage seen in the derivatives market, analysts believe BTC is poised for consolidation with some volatility before moving towards $60,000 as we enter the new year. Bitcoin whales (big holders) are continuing depositing BTC to exchanges, according to the analytics firm CryptoQuant. This suggests that the whales are positioning themselves to profit from the low price. While BTC consolidates, we expect Ethereum and related coins to lead the market forward.

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