While the cryptocurrency ecosystem rejoiced the short-term rally from February 21 to 23, February 24 brought some bad news as the crypto market observed a deep plunge of $11 billion and from $141 billion to $130 billion.
24 Hour Chart of Crypto Market Valuation, Source: Coinmarketcap.com
As per analysts, the reason behind it could be cited to the inability of Bitcoin to break out of the $4,200 mark, a crucial resistance level for the dominant cryptocurrency. A technical analyst, DonAlt stated that alternative cryptocurrencies or small market cap assets are initiating the last phase of retracement. The market might sustain its recovery, in the near-term. The analyst said:
“All the bearish altcoins setups we’ve been discussing on stream for the last week are finally starting to play out. One more leg down should finish their retracements and make them attractive again. Staying hands off due to their weakness paid off. Patience is key.”
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Economist Alex Krüger, explained last week that the charts illustrate all indicators of a bottom for Bitcoin at $3,122 and the relatively low volume of the cryptocurrency exchange market shows minimal interest in the market.
He added, that until bitcoin breaks out of the crucial $4,200 resistance level the token remains vulnerable to a drop to the low $3,000 region. DonAlt stated in an exclusive interview with CCN that investors could have been overly excited about breaking the resistance level, which caused the market to retrace. He noted:
I’d argue the main reason why this happened was due to the entire crypto sphere getting overly excited into technical (Weekly & daily) resistance combined with the fact that there’ll probably be a lot of ‘sell the news’ coming the closer we get to the ETH fork.
Since early February the Ethereum price has observed by 60 percent in anticipation of the Constantinople hard fork. The upgrade that will be released by this week’s end, includes a key update on the Ethereum blockchain network regarding the decline in block rewards.
It is somehow the case that the cryptocurrency ecosystem, investors tend to dump their holdings following events, updates, or a product launch, and Constantinople hard fork could actually lead to a similar reaction.
For the long run the hard fork us a bullish fundamental factor for ETH as they decrease the potential circulating supply of the asset. As for short-term, it could also have a negative effect on the price trend of the asset majorly due to the behavior of many investors in the space.
The better news is that even after the abrupt 9.5 percent decline in the price of Bitcoin from $4,190 to $3,795, fundamental factors of BTC and most major crypto assets remain strong. Even so, the magnitude of the sudden drop in the Bitcoin price surprised investors as BTC cleanly broke out of the $4,000 resistance level, which it struggled to overcome for months.
After getting close to breaching the $4,200 resistance level, the traders emphasized that Bitcoin could achieve $5,000 to $6,000 range in the months to come. Krüger said on February 19:
“Once price breaks 4200 it could move fast. Matter of watching levels, just like 3700 yesterday. Key buy level below is 3700. No longs sub 3550.”
The smaller tokens often experience some intensified price movements as when the price of Bitcoin surges or drops. In the past 30 minutes, tokens recorded losses in the range of 10 to 26 percent against the U.S. dollar as BTC retraced by 9 percent.
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