Crypto Charts Signal Weaker Momentum

What to Know:

• Bitcoin is showing technical patterns similar to those preceding the 2022 crypto bear market, raising concerns about a potential deeper correction.
• The broader crypto market is experiencing diverging capital flows, with Bitcoin seeing outflows while XRP and Solana investment products attract inflows.
• Bitcoin’s struggle to reclaim key moving averages and the presence of significant sell-side liquidity near $100,000 could impact liquidity across the crypto market, including XRP.

Bitcoin’s recent price action has sparked concerns among analysts, with some pointing to similarities between current patterns and those seen before the 2022 crypto bear market. The next few weeks could be critical in determining whether Bitcoin can reverse course or if a more significant correction is on the horizon. While Bitcoin struggles, alternative cryptocurrencies like XRP and Solana are experiencing positive capital inflows, highlighting a divergence in market sentiment.

Technical Indicators Flash Warning Signs

Market analysts at Material Indicators have identified a concerning pattern in Bitcoin’s weekly price action. The current structure mirrors the consolidation phase that preceded the major breakdown in 2022. Bitcoin is trading between the 100-week and 50-week Simple Moving Averages (SMA), reminiscent of the period before the previous downturn. However, the current situation appears more precarious, as Bitcoin has already lost support from the 50-week SMA, and its weekly Relative Strength Index (RSI) has fallen below a critical level.

Death Cross Looms

A potential “death cross” on the weekly chart is adding to the bearish outlook. The 21-week SMA is projected to cross below the 50-week SMA soon, a signal that has historically confirmed a shift to a macro downtrend. According to Material Indicators, Bitcoin’s ability to reclaim the 50-week SMA as support will be the deciding factor. Failure to do so would significantly increase the likelihood of a deeper correction.

Sell-Side Liquidity Capping Upside

Even if Bitcoin attempts a rally, substantial sell-side liquidity stacked near the $100,000 level could present a major obstacle. This resistance could limit any potential upside momentum, making it difficult for Bitcoin to break out of its current range. The analyst concludes that the next two to three weeks are crucial. Bitcoin must mount a convincing recovery to avoid a decisively bearish macro trend.

Diverging Fortunes in Altcoins

As Bitcoin struggles, other areas of the crypto market are showing signs of strength. Spot Bitcoin ETF products have experienced consistent outflows, indicating that capital is leaving Bitcoin. However, investment products for XRP and Solana have attracted significant net inflows, suggesting that investors are shifting their focus to alternative cryptocurrencies. XRP has seen $1.14 billion in net inflows, while Solana has drawn $1.34 billion.

XRP’s Relative Strength

The shift in capital flows toward XRP could be attributed to several factors, including optimism surrounding Ripple’s ongoing legal battle with the SEC and the increasing adoption of XRP for cross-border payments. The ability of XRP to attract investment while Bitcoin faces headwinds highlights the potential for altcoins to outperform during periods of Bitcoin weakness. This divergence could impact liquidity across the broader crypto market, as capital is reallocated to different assets.

In conclusion, Bitcoin’s current technical setup raises concerns about a potential correction, while alternative cryptocurrencies like XRP and Solana are attracting capital. The next few weeks will be critical in determining Bitcoin’s trajectory and the overall health of the crypto market. Investors should closely monitor Bitcoin’s ability to reclaim key support levels and the continued strength of altcoins like XRP.

Related: Crypto Market Cap Target Forecasted

Source: Original article