After briefly re-testing higher levels, Bitcoin and the crypto market retraced and gave back the gains obtained over yesterday’s trading session. The general sentiment in the market has been negative, with a large majority of participants expecting further losses.
At the time of writing, the price of Bitcoin trades at $19,600 with 3% and 8% in losses over the past 24 hours and 7 days, respectively. The first crypto by market cap is one of the worst performers in the market, only surpassed by Dogecoin and Ethereum with a 4% and 3.7% loss over the last day.
On the daily chart, the total crypto market cap was consolidating between $800 billion and $1.2 trillion coming in from a massive crash during April and June. The sector was trending upwards and finding support on a trendline that was pierced over the past week.
Thus, the sector might be unable to sustain its current levels as the daily chart hints at further losses and a potential re-test of its June lows somewhere around $800 billion.
Data from research firm Santiment highlights an important spike in short positions as digital assets trend lower. As seen in the chart below, traders have been shorting the price of Bitcoin as the price consolidates.
This has led to sudden spikes in funding rates taking them into the positive-negative territory, meaning traders are expecting bearish price action. The chart spells trouble for this market participant.
In August, whenever traders positioned themselves for more gains or losses, the market tends to trend in the opposite direction. Last week, shorts were hurt when the market trended upwards and then longs were hurt went the market turned in the opposite direction. Santiment said:
Traders continue to short whenever prices see a notable price dump. According to the $BTC average funding rate across Binance, BitMEX, DYDX, and FTX, the reaction to Friday’s drop was the most aggressive traders went against markets since May.
Will Crypto See A Fresh Relief Rally?
Additional data provided by analyst Justin Bennett indicates that the crypto total market cap, as mentioned, broke below a bottom of an important trendline. However, Bennett believes the chart is suggesting a pullback into previous support.
As seen in the chart below, this could push cryptocurrencies to a 3% to 5% profit before a crash to around $800 billion. For the altcoins sector, this pullback could hint at a significant crash. Bennett said:
And to anyone who says altcoins won’t pull back that far…They already did once. Alts pulled back over 90% during the last bear market. So, to think they’ll stop at -74% this time with raging inflation, a global recession, etc. is naive, in my opinion.
— Justin Bennett (@JustinBennettFX) August 29, 2022