Crypto Frontline

The first half of the week had not come with the same impressive gains and instead, the cryptocurrency market had erased some of the ground gained, losing approximately $20 billion in market capitalization on August 11^th alone. There were no major catalyzers behind the bearish move, which means it was purely technical, resulting from overbought market conditions.

Bitcoin find resistance around $12,000

As we’ve expected in our last weekly crypto analysis, the $12,000 key area prevented any upside momentum continuing and at the time of writing, Bitcoin is hovering around $11,500 after dropping towards $11,100. Although this brief selloff does not necessarily negate the long-term bullish sentiment, it is signaling buyers might need a short break.

Keep in mind that Bitcoin continues to trade around $11,500 and buyers don’t have serious reasons to worry for now. It is interesting to note the selling occurred right when global stock markets were also retreating lower, communicating the correlation between these two asset classes continues to remain elevated.

Most large altcoins weaken

A similar situation can be spotted in some of the top 10 altcoins by market cap. Ether is down 2.15%, XRP lost 4%, and Litecoin 5%. Chainlink continues to be one of the best performers, up 6.6% over the past 24 hours. It is just one of the exceptions, though, as most of the market is in red for now.

Could this signal a much deeper corrective move might be on the horizon? There isn’t enough price action data to suggest a market turn had occurred now. This is just a short-term consolidation if we look at the past four months of performance.

Some selling interest combined with profit-taking around key resistance levels might be some of the reasons behind the move. Financial markets are still running on steroids, driven by excessive liquidity provided by central banks. Risk assets like stocks and cryptocurrencies are still some of the best performers for the year, given investors are confident in the monetary and fiscal support.

Still, stimulus won’t be kept at the same pace indefinitely, which means financial markets will need to work on their own sooner or later. Reduced central banks intervention is one of the key variables to watch in the next few months, as the economic recovery from the pandemic enters a very critical phase. Markets are pricing in the ideal recovery scenario and any negative event will reinforce new selling pressure.