Key Takeaways
What factors are contributing to the current weakness in the crypto market?
Declining on-chain liquidity, token unlocks, and institutional outflows are intensifying bearish pressure.
What does the Fear and Greed Index suggest about investor sentiment?
With a reading of 28, the index indicates a fearful market, signaling low demand and cautious sentiment.
The market continues to struggle, with total capitalization battling to recover from its slump at around $3.7 trillion.
Analysts warn that a further decline is likely, as capital flight is expected to intensify in the coming days.
Liquidity and unlocks add pressure
On-chain liquidity has broadly declined in recent days as sellers have become active once again.
Liquidity, which tracks the amount of cryptocurrencies locked in decentralized protocols, fell by approximately $7.94 billion after reaching $157.64 billion on the 27th of October.
This capital flight could be a corrective move, but it also indicates that buying interest in the broader market has weakened.
Source: DeFiLlama
The remaining bullish investors could face further struggles as token unlocks totaling $310.56 million in the next fourteen days are set to add more supply to the market.
In fact, about $51.26 million worth of crypto assets is expected to be added between the 1st and the 2nd of November.
This bearish condition has caused many investors to shift away from the market as the outlook threatens their positions.
Institutional outflows and companies betting against crypto
Institutional outflows have continued to heighten in the past two days.
Data from DeFiLlama shows that aggregated exchange-traded funds across several approved Bitcoin [BTC] and Ethereum [ETH] products have turned negative.
The total outflow between the 29th and the 30th of October has reached approximately $1.22 billion, with that amount of assets offloaded to the market.
Source: DefiLlama
Interestingly, digital asset treasuries have also seen a sharp decline in crypto purchases and treasury additions.
After recording their highest weekly purchase of $6.67 billion across multiple assets in the week ending on the 11th of August, their buying activity has dropped drastically to just $364.98 million.
This marks the lowest purchase since the 28th of July, according to available market data. The lack of treasury interest suggests weaker demand for digital assets.
Any change to come?
The downward pressure on crypto assets is likely to persist, particularly as the market remains clouded by anxiety.
The Fear and Greed Index currently shows that the market is in a “fearful” phase with a reading of 28, a situation that worsened on the 27th of October.
Source: DeFiLlama
If the market continues to linger in this lower range, it implies a strong possibility that demand will remain low. With heightened supply expected, the market will likely stay on the downside.
For now, altseason indicators show that altcoins remain in a bearish phase, with less capital flowing into them, a similar situation to Bitcoin’s current state.
