In merely three hours, the crypto market has lost more than $9 billion of its valuation, as the price of tokens and small market cap cryptocurrencies dropped substantially.
Tokens Plunge 10% Off of 2% Decline of Bitcoin
After demonstrating a relatively strong corrective rally, the crypto market saw a decline in the value of tokens, which recorded 30 to 50 percent gains against the US dollar over the past 48 hours.
Nano, Zilliqa, and Aelf, the best performers against both the US dollar and Bitcoin on August 17, dropped by 18 percent, 13 percent, and 12.9 percent respectively, becoming the worst performers on August 18.
Some analysts have attributed the decline in the price of tokens in the past three hours to the overly strong recovery of the cryptocurrency market, which was triggered as the crypto market reached oversold conditions.
Respected cryptocurrency trader and FX market maker trading analyst Alex Kruger recently said:
“BTC was rejected at $6,600 and the whole crypto complex fell like a house of cards (-10%/20% this morning). A strong bounce out of massively oversold levels does not indicate a new bull run has started.”
In essence, Kruger emphasized that the majority of traders in the cryptocurrency sector mistook a minor corrective rally formed by strong oversold conditions in the crypto market for a bull rally, and expected the market to perform better than its projected recovery in the first place.
As investors started to acknowledge the minor corrective rally as a proper rally, traders aggressively pursued high-risk high-return trades in tokens, driving the price of certain tokens such as VeChain and Ontology by 30 to 50 percent.
At one point, on August 18, the price of VeChain increased by nearly 90 percent against the US dollar in a 24-hour span.
Subsequent to a major correction, similar to the drop from $8,500 to $5,800 Bitcoin experienced in early August, a stable recovery is necessary for the market to find momentum that can support a strong mid-term rally.
In the past few days, investors overreacted to a minor recovery that was formed after breaking out of the $6,000 support level by aggressively pushing high risk trades.
In the upcoming days, it is likely that Bitcoin will minimize its loss at around the $6,400 region and tokens find their momentum but the expected fall in the price of tokens on August 18 alerted investors that engaged in the market with unjustified anticipation after a long slump.
Currently, the volume of Bitcoin and Ethereum remain at July levels, which do not suggest that a strong rally is in play in the short-term. The volume of tether has increased from below $2.8 billion to $3.5 billion in the past 12 hours, suggesting that investors are hedging the value of cryptocurrencies to the value of the US dollar to avoid short-term losses.