Crypto Markets Could Crash Soon: Top Warning Signs You Should Know

The cryptocurrency market has been growing at an impressive pace lately. In just seven days, its market cap skyrocketed from $2.216 trillion to $2.953 trillion, showing one of its strongest weekly performances ever. This optimism has lifted almost all major cryptocurrencies. Bitcoin has surged by 20.6%, and Ethereum has gained 13.6% in the past week alone. Investor confidence is high, but experts are warning that caution is needed.

Why? There are at least three signs that investors should rethink their approach to risk. Let’s explore them!

Why Is the Crypto Market Overheating?

At the start of November, the crypto market cap was $2.307 trillion. It dropped to a monthly low of $2.214 trillion by November 4, but on November 5, a surge in buying pushed the market cap to $2.931 trillion. After a small dip to $2.89 trillion on November 12, it reached a new all-time high of $2.953 trillion.

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 Warning Signs of a Possible Market Drop

1. Meme Coins: Too Hot to Handle?

Meme coins have seen explosive growth recently, with a 11.4% rise in just the past 24 hours. Many of the top meme coins have posted huge gains during this bull run. Dogecoin has surged by 107.6%, Shiba Inu by 37.2%, and Pepe by an impressive 117.9%. Even smaller coins like Bonk and Dogwifhat have gained 79.4% and 80%, respectively.

While these gains seem exciting, meme coins don’t have practical uses, making them unpredictable. Experts warn that these rallies are often unstable and can end quickly.

Warning Sign: Dogecoin’s RSI is at a high 92.82, signaling that it may be in overbought territory and could face a pullback. 

Futures Funding Rates: A Risk of Sell-offs

Experts are also concerned about the rising futures funding rates. When these rates are too high, they can lead to sudden sell-offs if investors start closing their positions. This can result in sharp market corrections.

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Extreme Greed

The Crypto Fear and Greed Index currently shows a reading of 88, signaling ‘Extreme Greed’ in the market. Historically, when greed reaches these levels, the market tends to correct sharply. In April, for instance, a similar spike in greed led to an 18% drop in Bitcoin’s price within three weeks.

The cryptocurrency market is on a strong upward trend, but the signs of overheating are clear. While it’s tempting to ride the wave, paying attention to these warning signals is essential.

By keeping an eye on key indicators, investors can manage their risks and avoid potential losses if a correction happens.