The top cryptocurrencies on the market entered an active correction phase after a substantial shift in attitude on the cryptocurrency market, losing up to 5% of their value, and here are the likely reasons, according to CoinMarketCap.
Market Oversaturation
Oversaturation of the market is usually the primary cause of any short-term correction following a big market pump. Whenever the market circumstances improve, traders become more active, bringing more purchasing power into the market.
As time passes, the equilibrium between asks and bids deteriorates, resulting in volatility spikes. When liquidity falls and selling pressure arises, most assets lose a portion of their value before recovering. Traders become less psychologically stable as a result of technical oversaturation, and they tend to take profits earlier than necessary.
Axie Infinity hack
One of the greatest exploits in the sector, as well as the biggest hack of 2022, has already produced a disruption in the cryptocurrency community, which might have resulted in a loss of funds from projects associated to the GameFi industry, causing fear on the market as a whole.
Axie, Convex, and Kadena are among the market’s largest losers, all of whom are connected to the GameFi or DeFi businesses in some way.
Market Needs to Cool-Off
A substantial portion of the cryptocurrency market has risen up to 50% in capitalization and value in the last two weeks, which is significant especially for such a volatile asset. Assets nearly never become “parabolic” and gain value without a correction, according to history and statistics.
We’re seeing the same thing right now, with most assets, including Cardano, Solana, Ethereum, and even Bitcoin, needing to cool off and get greater trading volume and funding in order to continue their upward trajectory.
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Source: https://coinpedia.org/news/top-3-reasons-why-major-cryptocurrencies-entered-correction-phase/