Key Takeaways
Roughly $23 billion worth of value has been wiped out of the cryptocurrency industry in the past 24 hours.
The top two crypto assets, Bitcoin and Ethereum, both erased double-digits as selling pressure increased.
Now, the market appears at risk of entering a prolonged bear trend.
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Panic has struck the cryptocurrency market as Bitcoin and Ethereum enter freefall. Although the correction appears to have paused, investors are still selling their holdings en masse.
Fear and Despair Echoes Across Crypto Market
More than $830 billion has been wiped out of the total cryptocurrency market cap over the past month, and further losses could be on the horizon.
According to data from Glassnode, the total number of Bitcoin held on known cryptocurrency exchange addresses has increased by nearly 2.77% over the past week. More than 67,712 Bitcoin has flowed into multiple trading platforms, coinciding with a volatility spike. Increased inflows to exchanges are generally seen as a bearish indicator because market participants usually go through exchanges to sell their holdings. Currently, many crypto holders appear to be preparing to sell their holdings in anticipation of a steeper correction.
Sentiment in the crypto market shifted after Bitcoin broke through a historic rising trendline spotted on its weekly chart. The event led to a 12.67% downswing in which Bitcoin hit a low of $29,740.
The recent drop is the third time the top cryptocurrency has breached the crucial demand level since March 2013. The first time Bitcoin broke below the level was in August 2015, resulting in a 37.67% correction that marked the end of the bear market. Similarly, Bitcoin crashed by 43.32% after slicing through the support trendline in March 2020.
Now that the critical support area has been turned into resistance, Bitcoin could experience similarly weak price action. Further selling pressure could push Bitcoin down by another 33.46% to $19,800.
Transaction history from IntoTheBlock’s IOMAP suggests that the pessimistic outlook could play out. Bitcoin is currently trading on a thin layer of support at around $31,000, and it faces stiff resistance ahead. Roughly 668,000 addresses bought nearly 376,000 Bitcoin between $34,246 and $35,190.
The same addresses may attempt to exit their positions to attempt to break even on their investments in the event of a bullish impulse, which could mean any upswing gets rejected. Based on the on-chain data, Bitcoin likely needs to print a weekly close above $35,190 to have a chance of invalidating the bearish thesis. If it succeeds, it could march toward $40,000.
The spike in selling pressure across the crypto market can also be seen from an on-chain perspective among Ethereum holders. Glassnode data shows that the number of addresses holding more than 1,000 Ethereum has decreased by 0.83% over the past week. More than 50 whales have sold or redistributed over $2.5 million worth of Ethereum each within the short period.
The mounting downward pressure and lack of buying interest has triggered a 13% correction in Ethereum’s market value in the last 24 hours, pushing it to a low of $2,200. The sudden downswing allowed Ethereum to break out of a symmetrical triangle in a negative posture.
The height of the triangle’s Y-axis suggests that Ethereum is primed for a 64% correction. A sustained weekly candlestick close below $2,600 could validate the pessimistic outlook, potentially leading to a downtrend to $900.
According to IntoTheBlock’s IOMAP model, it appears that Ethereum’s most crucial supply wall sits at around $2,450, where over 652,000 addresses have purchased more than 13.71 million Ethereum. Any further signs of weakness could encourage these addresses to exit their positions to avoid incurring significant losses, accelerating the downward pressure.
To invalidate the bearish thesis, Ethereum would likely have to surge to $3,270 and print a weekly candlestick close above it.
Until Bitcoin regains $35,190 as support and Ethereum surges above $3,270, the crypto market is likely to look shaky. Besides the top two crypto assets, many other coins are trading on weak support. That could mean they suffer steeper corrections than the more established cryptocurrencies.
The last 24 hours have been something of a bloodbath across the market. Terra’s LUNA has crashed by more than 60% due to UST losing its peg to the dollar. Bored Ape Yacht Club’s ApeCoin also dipped as low as 33%, while STEPN’s GMT briefly crashed by more than 40%.
Disclosure: At the time of writing, the author of this piece owned BTC and ETH.
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