Cryptocurrency Market Collapses Following Bitcoin...Funds Shift to Stocks

▲ Virtual Asset Decline/ChatGPT Generated Image

The cryptocurrency market continued its bearish trend, pushed back from key resistance levels. As Bitcoin (BTC) faced resistance at major price points, a contraction in spot demand combined with fund migration patterns exacerbated downward pressure across the market.

According to BeInCrypto, as of April 23, the total cryptocurrency market capitalization was recorded at $2.57 trillion, a 0.75% decrease from the previous day. Bitcoin fell by 0.77% to $77,701, failing to break through the $79,474 resistance level formed the day before. Among major altcoins during the same period, Ethena (ENA) plunged over 6%, leading the bearish trend amid DeFi market instability.

Behind the market downturn is the flow of funds. While the S&P index closed higher, the cryptocurrency market showed weakness, suggesting a repeating pattern of funds shifting to the stock market. Indeed, since April, there has been a continuous trend where S&P up days coincide with bearish movements in the crypto market.

Technically, the market has also been pushed back from key resistance zones. The total market capitalization saw its rise limited around the Fibonacci 78.6% retracement level of $2.56 trillion, with short-term upper resistance indicated at $2.65 trillion. Conversely, if the $2.56 trillion support level breaks, there is potential for a decline to $2.49 trillion, and further to $2.44 trillion.

This correction is assessed to have exposed the fragility of the market recovery. The recent rebound heavily relied on an increase in Bitcoin perpetual futures positions, while spot demand consistently showed a declining trend. Analysis suggests that a structure formed where leverage-based rallies were met with resistance, leading to rapid declines.

Bitcoin also exhibited a similar trend. The Relative Strength Index (RSI) maintained bullish momentum, recording 63.43 as of April 22, but the price remained around $79,474, showing a lower increase compared to previous highs. A reduced upside potential despite similar momentum suggests a weakening market structure. On-chain data also confirmed that the recent rally was driven by derivatives demand rather than spot demand.

In the short term, if Bitcoin breaks above $79,474, further upside potential opens up. Conversely, if it closes below the Fibonacci 23.6% retracement level of $74,881, downward pressure could extend to $72,039, and then to $69,743.

Ethena amplified its losses amid the DeFi market shock. The price dropped to $0.104, failing to hold the Fibonacci 50% retracement level. While the cup and handle pattern remains, the handle's correction has exceeded the expected range. However, an analysis suggests that a decrease in selling volume indicates some potential for a short-term rebound.

Across the DeFi market, total deposited assets decreased by $14 billion in 48 hours following the KelpDAO hack. Particularly, $10 billion worth of funds exited from Aave alone, exacerbating market instability.

For Ethena, the recovery of $0.106 is identified as a key variable determining its short-term direction. If it subsequently breaks above $0.122, the bullish pattern could strengthen, and a breakthrough above $0.144 suggests the potential for a full pattern completion. Conversely, a drop below $0.099 would weaken the bullish scenario, opening up the possibility of further decline to $0.076.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*