After a week of massive volatility and slump, the cryptocurrency market looks somewhat calm with signs of a stabilising relief recovery in thin volume trading as bargain hunters and technical traders have been in play to provide a risk-off tone to reverse the tipping point.
Bitcoin (BTC) is consolidating near US $36,400 after pushing above the first resistance level of US $35,000 and appears to be building momentum towards US $40,000 which can open the way even higher levels.
A similar surge in the past days was sold off sharply and eventually bulls lost the strength to push high.
There is pretty strong support around the US $30,000-$32,000 mark and further down at US $25,000 if the still intact overall downtrend remains.
Ether (ETH), the second largest cryptocurrency after bitcoin, is attempting to push towards US $2,400 although the upside traction appears to be limited for now due to high selloff volumes lined up around US $2,500.
As of press time, Bitcoin (BTC) is changing virtual hands at US $36,480, Ether (ETH) at US $2,320, ripple (XRP) at US $0.86, Binance Coin (BNB) US $295, cardano (ADA) at US $1.47, Dogecoin (DOGE) at US $0.33, ChainLink (Link) at US $23.36, UniSwap (UNI) at US $19.78, Polkadot (DOT) at US $20.80 and Stellar (XML) at US $0.41.
The losses on the cryptocurrency market is still widespread and the alignment of several risk factors remains intact at the moment due to challenging underlying market conditions.
Light or thin volume can be used by traders, even large institutional entities for a tactical trading strategy to influence market direction and make profit in the short-term volatility. The strategy is to trade huge volumes in an illiquid or subdued market to move the market in the desired direction, which is usually assisted by other traders in euphoria who think the market is recovering.
If evil has one power, it is the power of illusion to mask reality. And in this case, it is the lack of any good news or positive outlook to fundamentally support high prices.
Therefore, the current rebound still needs to find fundamental support to push higher not to be considered a dead cat bounce – a temporary, short-lived recovery of asset prices amid an intact downtrend and does not indicate a reversal of the overall declining trend.
Further short-term recovery is still likely as many technicians, as well as old-school fundamental investors prefer to hunt bargains and value in a falling market after signs of panic, or capitulation by the bulls.
However, investors and traders are growing increasingly nervous amid souring mood and negative outlook that may open up a long-lasting downward spiral, adding to the challenges facing digital asset holders in the market that has lost almost half of its capitalisation in the past week.
It is important to remember that there’s no such thing as a bear market without a bear market rally, and multiple ups and downs are a common feature of markets in the immediate aftermath of crashes.
Blockchain-based digital tokens suffered two crashes last week in response to talk of a crackdown in China and the developments in the US.