As the bitcoin price fails to see upside momentum, the crypto market is at risk of a deeper pullback in the short-term. While the bitcoin price sustained the $6,000 level for an extended period of time, altcoins have continued to see more downside.
Well-known trader DonAlt said:
“BTC looks like it could go up, down or sideways. Alts look like they could go down, down or down.”
The bitcoin price has been on a decline as of late primarily due to the drop in appetite for high-risk assets. Altcoins present additional risk, which investors are seemingly unwilling to take.
Altcoins seem battered, as crypto market loses tens of billions of dollars
Since March 7, within about three weeks, the valuation of the crypto market has dropped from $264 billion to $175 billion, by around $89 billion.
Consequently, altcoins underperformed against both the USD and bitcoin, as investors flocked to stablecoins like Tether.
After the overnight 5 percent drop in the bitcoin price, technical analysts foresee a steep drop ahead for bitcoin in the near-term. Strong support levels for bitcoin are found at $5,800 and $5,250, according to crypto trader Michael van de Poppe.
“Brokedown after a distribution pattern and clear rejection of the $6,900 area. On the first support around $6,000-6,100 here. Might be testing $6,400 before continuing to drop, primary level for support is $5,800 and more heavily the $5,250 area.”
The altcoin index perpetual futures on FTX indicates a massive 56 percent drop in the altcoin market within merely 43 days, dropping to levels unseen since 2017.
Market is exhausted
Similar to the U.S. stock market, based on the performance of altcoins in the past two weeks, it is highly unlikely that the altcoin market sees the so-called “alt season” until the global economy rebounds from the economic consequences of the coronavirus pandemic.
There is a clear lack of buy orders and buying demand across all exchanges and assets within the crypto market, increasing the probability of a larger correction to hit the entire asset class in the near-term.
As financial analyst Koroush AK said:
“Most businesses and individuals still have 1/2 months runway. Assuming handling the virus lasts several months not several weeks. Let's see how many want to be holding, let alone buying, bitcoin when struggling to pay bills and put food on the table.”
The low cash buffer of small businesses, which on average is estimated to be 29 days, leaves the U.S. and European economies at risk of continuous decline in the first half of 2020.