The crypto market has demonstrated a short-term corrective rally in the past 24 hours, after major assets like Ethereum showed strong oversold conditions.
ETH, the native cryptocurrency of the Ethereum blockchain network, has been on an intensified downtrend since June, performing especially poorly against Bitcoin.
On September 13, ETH has shown resilience in the sub-$200 region, rebounding to $188 by recording a solid 9 percent increase in price. The recovery of Ethereum led to the price surge of tokens, enabling Decentraland (MANA), VeChain (VET), WanChain (WAN), Aion (AION), ICON (ICX), and 0x (ZRX) to increase by 10 to 20 percent.
Even during a corrective rally, the market has shown the same trend it has demonstrated over the past three months. Over the past 24 hours, Bitcoin has recorded a slight increase in value, rising by 2 percent to $6,400. The rest of the market, which experienced extreme volatility throughout September, showed intensified movements on the upside.
Since February, the crypto market has tested the $200 billion region four times, in February, April, June, and August. Throughout all of the corrections, Bitcoin has shown stability in the low price range while others such as Ethereum, Bitcoin Cash, Ripple, and small market cap cryptocurrencies have struggled to show resilience.
The minor movement in the price trend of Bitcoin in contrast to the movement of the rest of the market suggests that the market has shown exhaustion in the low price range. Because both major cryptocurrencies and tokens suffered significantly against Bitcoin already, it has become more difficult for bears to push the market below its current price range.
Economist and cryptocurrency trader Alex Kruger explained:
“Volume that extreme speaks of exhaustion and ‘a’ bottom. Similar exhaustion volume can be observed in Binance, Bitmex and most exchanges, both against the USD and BTC.”
But, as mentioned above, the corrective rally of September 13 was caused by extremely oversold conditions, which does not necessarily lead to a mid-term rally or a complete trend reversal. As Kruger noted, it is very much possible for Ethereum and the rest of the market to continue their recovery in the upcoming days but suffer another drop on the downside.
“Direction of ETHUSD depends on BTCUSD. If BTC breaks $6,400 next levels are $6,600 – $6,650 and $6,850. ETH would break up much harder. Temporarily. Then expect selloff to resume, BTC to break the year lows, hellfire among alts, and ETH weaker than competing tokens. That’s my view atm,” Kruger added.
The cryptocurrency market is still bottoming out and evidently has not recovered from its 80 percent correction. While it is difficult to see the market initiating another large correction prior to a mid-term recovery, major cryptocurrencies like Bitcoin and Ethereum will likely remain in the low price range for weeks to months before recovering to their previous levels.
In the short-term, analysts consider the probability of Bitcoin breaching the mid-$6,000 region to be relatively high, bringing the rest of the market with it to the upside.
Featured image from Shutterstock. Charts from TradingView.
Last modified: May 20, 2020 6:00 PM UTC