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The crypto market is cooling after its recent rally, with Bitcoin and Ethereum losing some momentum. This shift signals a pause rather than an end to the trend, putting the focus on risk management and smarter positioning over chasing quick gains.
Bitcoin and Ethereum face momentum shift
Bitcoin (BTC) and Ethereum (ETH) are retreating after recent gains, with BTC down around 2% and ETH sliding more than 3% at the time of writing.
This pullback follows a strong rally in previous weeks, suggesting a notable shift in short-term market dynamics.
On broader timeframes, BTC has slipped below its 50-day moving average – a technical sign that the recent uptrend is losing steam.
The next major support zone for BTC sits near $112,000, marked by the 2 August low and the 22 May high.
Profit-taking has been a key driver of this correction, particularly among late entrants chasing record highs.
Risk management becomes a priority
As Bitcoin and Ethereum give back some of their recent advances, traders are shifting focus from chasing upside to protecting gains.
The drop under the 50-day moving average highlights the need for a more defensive stance. Buying protective put options has become a popular hedging strategy, with the Bitcoin put-to-call ratio climbing to 0.75 – its highest level in over a month.
This signals rising demand for downside protection as market participants prepare for the possibility of a deeper pullback towards the $112K support.
At the same time, Ethereum’s implied volatility has spiked, with 30-day at-the-money volatility in ETH options jumping from 50% to 65% in just a few days.
For traders expecting sharp moves but uncertain about direction, strategies like long straddles or strangles could capture potential gains, regardless of whether the next big move is upward or downward.
Opportunities amid consolidation
For traders who view this downturn as a healthy consolidation before another leg higher, selling cash-secured puts near the $112K support could offer an attractive entry point.
This approach allows them to collect option premiums while defining a preferred level to re-accumulate BTC, maintaining confidence in the long-term bullish structure.
The current setup also carries echoes of the summer 2021 cycle, where a sharp multi-week correction followed a strong rally before the market rallied again to new all-time highs.
With open interest levels holding relatively steady, it appears that large positions have not yet been fully unwound.
This suggests that while caution is warranted in the short term, the broader trend may still be intact – with this phase representing consolidation rather than the end of the cycle.
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