Why The Crypto Market Looks Unhealthy With Bitcoin At $21K, Expert Says

Reynaldo Marquez

1 year ago

3 mins read

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Bitcoin and the crypto market continued to move sideways over the past week after recording important losses during the weekend. Despite the short-term bearish price action, there seems to be more appetite for risk in the sector as market participants allocate more capital to altcoins.

At the time of writing, Bitcoin (BTC) trades at $21,500 with a 2% profit over the past 24 hours and an 11% profit over the past 7 days. The Bitcoin Dominance (BTC.D), an indicator used to measure the percentage of the crypto market’s total market cap comprised of BTC, has been trending downwards as altcoins take off yearly lows.

As seen below, this metric has seen an important loss since July 2022 and was moving sideways across August only to resume bearish momentum over the past week. The metric often trends to the downside when the altcoin sector is about to or is experiencing bullish momentum.

Bitcoin BTC BTCUSDT BTCD 1 — BTC Dominance trends to the downside on the 4-hour chart. Source: **BTC.D Tradingview**

Data from research firm Sentiment record a spike in Bitcoin transactions settling at a loss as traders turn into altcoins. As seen below, the BTC Ration of On-Chain transactions, a metric used to measure the number of transactions in profit versus those in losses, has followed Bitcoin’s dominance indicator and could be on the verge of further downside pressure. Santiment noted:

Bitcoin has slumped since briefly jumping back above $25k on Aug 14th. As traders have turned their attention to Ethereum and altcoins, $BTC transactions are mostly happening at a loss. This is the lowest ratio of profit taking we’ve seen on record.

Santiment has noticed that Bitcoin is lagging in other areas, while Ethereum outperforms. The second cryptocurrency by market cap still trades at a critical area and records a 5% profit in the past 24 hours.

Ethereum is probably positively responding to the expectation around “The Merge”, the event that will complete its transition from a proof-of-work (PoW) consensus to a proof-of-stake (PoS) consensus.

As Bitcoin Lags, Ethereum Shows Bearish Signs Ahead Of “The Merge”

Santiment claims Ethereum has displayed a high correlation with the world’s biggest financial indexes, the S&P 500 and the Nasdaq 100. This only highlights the hype around “The Merge”, as many see it as an important moment in the history of Ethereum and the first milestone into a road full of improvements.

As this major event approaches, there is a higher possibility of a “buy the rumor, sell the news” price action. In other words, Bitcoin could continue to lag Ethereum’s price until “The Merge” when the price could see an increase in selling pressure.

This often happens with highly expected crypto events. Analyst Justin Bennett showed the “Head and Shoulders” pattern below that could provide a potential trajectory for ETH’s price for the short term.

You’ll want to keep an eye on this potential head and shoulders for $ETH.

The measured objective (if confirmed) lines up with $1k support.

Confirmation below $1,500.#Ethereum pic.twitter.com/voioPizlhX

— Justin Bennett (@JustinBennettFX) August 23, 2022

Bennett added the following on the current market conditions and why traders must exercise patience and caution:

Most will get faked out at least once chasing what they believe to be the bottom. By the time markets actually bottom, those investors will be lucky if they have 50% of their capital left. It’s never as easy as it looks.

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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