It was a sea of red in the crypto industry as Bitcoin, Toncoin, Dogecoin, and other cryptocurrency prices collapsed. Bitcoin dropped to $55,000 while Toncoin (TON) and Dogecoin (DOGE) fell to $6.62 and $0.094. Most altcoins, including Solana, Pepe, and Cardano also retreated.
Bitcoin double-top pattern
There are fundamental and technical reasons why the price of Bitcoin crashed hard this week. Technically, as shown above, this drop happened after the coin formed a giant double-top chart pattern on the daily chart.
The first smaller double-top pattern happened at around $72,200 between March and April while the second happened in June. Their necklines were at $60,884 and $66,573, respectively.
The neckline of the bigger double-top pattern was at $56,525, which the coin has now broken, pointing to more downside. By measuring the size of distance between the double top and the neckline, this sell-off will continue to about $44,000 in the near term. This view will be confirmed if the Bitcoin price drops below the key support at $50,000
The other risky technical thing to watch is that Bitcoin has now crashed below the 200-day moving average. That raises a possibility that the coin will form a death cross, which happens when the two moving averages make a crossover.
Toncoin, Dogecoin, Shiba Inu, and other altcoins have all dropped because of the ongoing Bitcoin’s price action.
Weak fundamentals and asset sales
These weak technicals have coincided with more bad news for Bitcoin. First, there are signs that assets that were received from Mt.Gox are about to be liquidated. These assets have started moving to exchanges, a move that happens before they are sold.
Second, the German government has already started to sell its Bitcoin holdings. As a result, as shown below, the amount of Bitcoin balances in exchanges has continued rising in the past few days.
Third, Bitcoin ETFs have not seen substantial inflows in the past few months, raising the risk of weak demand.
Fourth, and most importantly, the industry lacks a major catalyst as we saw earlier this year. The first catalyst was the acceptance of spot Bitcoin ETFs by the Securities Exchange Commission (SEC) followed by the Bitcoin halving.
The only major catalyst remaining is the acceptance of spot Ethereum ETFs. While this is a good thing, analysts believe that its impact will be more limited since it has already been priced in.
Further, there are signs that Joe Biden will be forced out of the presidential race, a move that could introduce a younger candidate. If this happens, there is a likelihood that Trump, who is seen favourably by the crypto community, will lose the election.
