The crypto market was shaken by panic last week as Bitcoin fell below support. There were stablecoins that could not be pegged to the dollar and LUNA which dropped to zero. As a result, cryptocurrencies have been more oversold that the Black Thursday COVID fall.
Let’s take a look at some of the crypto market conditions that have been historically highly overpriced.
The Total Crypto Market is More Oversold than Black Thursday
There was bloodshed in Bitcoin and an apocalypse with altcoins. The stabilitycoins pegged at the value of the all-powerful dollar were totally shaken. Strategically, a group or actor of evil actors attacked the dollar peg of the UST stabilizecoin. The result was an algorithm-driven domino effect that saw the liquidation of all reserve assets including BTC.
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Bitcoin fell through support, and several altcoins experienced a drawdown of between 80-90 percent or more. LUNA (an asset linked to UST) fell to zero. From the crypto market total, billions were lost. There was never a better time than now to doubt the future of cryptocurrency. Market veterans advise that you don’t panic if things get uncertain.
Weekly RSI more than Black Thursday. Source: TradingView.com CRYPTOCAP - TOTAL| Source: CRYPTOCAP-TOTAL on TradingView.com
“When in doubt, zoom out,” holds true in this case. If you compare the latest crypto selloff with Black Thursday’s, it is clear that the weekly RSI reached more extreme levels of oversold. Black Thursday saw a drawdown of 50%, while corrections to the current candle have only produced 30%.
By definition, a hidden bullish divergence occurs when an asset’s price sets a higher low, yet the indicator sets a lower low. This is often indicative of continuation.
Elliott Wave Theory suggest the cycle isn't complete | Source: CRYPTOCAP-TOTAL on TradingView.com
Are We Still in the Thrill of a 45% Colapsing?
Elliott Wave Theory may provide insight into the future. It is trading in a parallel channel that the total cryptocurrency market cap just reached. It is estimated that the upper limit of this channel is $10 trillion USD.
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This fact may be the only hope for bulls right now. However, it is possible that bears could still have the last laugh. Weekly RSI now stands at the lowest level ever since the bottom bear market, and is the fourth-lowest in TradingView’s history.
Only three other times has the total crypto market cap been more oversold | Source: CRYPTOCAP-TOTAL on TradingView.com
The previous three lows on the weekly RSI included two bear market bottoms. However, the remaining low was then followed by a 45% drop to the final bottom. A further 45% decline from this point would bring the crypto market total back to $600 billion or less than the peak in January 2018.
The risk of losing your investment is very high. However, as the market becomes more oversold, so too does the chance for you to earn a lot. You must act accordingly.
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