Cryptocurrency Market Faces Downturn Amid Overbought Conditions and Unsettled ETF Decisions
Summary:
The cryptocurrency market is experiencing a downturn, primarily driven by declines in Bitcoin and Ether. As of November 15, the market's total capitalization dropped by over 6% from its peak of $1.41 trillion. This recent slump is attributed to overbought conditions and an easing of optimism around a potential approval for a Bitcoin exchange-traded fund (ETF). Additionally, the SEC's ongoing review of several Spot Bitcoin ETF applications, along with a fake BlackRock XRP trust filing, have unsettled the market. Despite this, the current correction does not necessarily imply an end to the crypto bull run.
The cryptocurrency market is currently experiencing a downturn, with leading digital currencies Bitcoin (BTC) and Ether (ETH) primarily driving these declines. As of November 15, a drop of over 6% has been observed in the cryptocurrency market's total capitalization when contrasted with its recent highest level of $1.41 trillion from two days prior.
The question arises - why is the cryptocurrency market exhibiting a downturn? This recent slump can largely be attributed to the oversold state of the market and a slew of other factors described below.
The top cryptocurrencies have marked their daily relative strength index (RSI) indicators consistently registering above 70, a clear bearish signal implying that the demand for assets at their peak prices has waned, contributing to a pullback. The market managed to shrug off these signals for some time, as evidenced by a 27.85% surge between October 22 and November 13. Pervasive optimism regarding a potential approval for a Bitcoin exchange-traded fund (ETF) fuelled the buoyant sentiment but this week, the excitement seems to be dwindling.
This week coincides with the review of several Spot Bitcoin ETF applications by the U.S. Securities and Exchange Commission (SEC). Applications from Hashdex and Global X ETFs must be decided upon by November 17, with Franklin Templeton's Bitcoin ETF application decision due by November 21. A lack of decision would push back the deadline to 2024.
Some disruption came from a fraudulent BlackRock XRP trust filing that stirred up the XRP markets significantly and could potentially impede the launching of a Spot Bitcoin ETF in the US, as it underpins the SEC's allegations regarding price manipulation within the crypto industry. Nevertheless, Bloomburg's James Seyffart predicts a 90% likelihood of a Spot Bitcoin ETF application approval by January 10, 2024. Traders might be extracting profits at the present, multi-month peak prices in the cryptocurrency market in anticipation of this prolonged wait.
The decline has prompted an influx of liquidations in the derivative market. For example, during the last 24 hours, approximately $307.67 million worth of liquidations occurred, with about $265 million being long positions. This downturn has a detrimental effect on cryptocurrency market prices as long liquid derivative positions are liquidated without any trading volume demand to buy.
This ongoing downturn does not necessarily signal the end of the year-long crypto bull run. Charts suggest the market is zigzagging within an upward momentum pattern with the recent drop in prices occurring as the topmost point of this trend is touched. The market appears to be seeking support near the 0.236 Fibonacci level of $1.24 trillion.
If the market can hold steady around $1.24 trillion, there's a high chance of retesting the upper trendline of the channel near $1.5 trillion. On the contrast, dipping below $1.24 trillion may risk the market sinking toward the lower trendline support near $1 trillion.
Published At
11/15/2023 10:16:17 AM
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