The seven-day recovery rally seems to be over as the majority of the cryptocurrency market is slowing down. The biggest digital assets have already lost around 5% of their value, including Ethereum, Bitcoin and XRP.
XRP fails to break massive resistance
The 20% rally XRP has showed us in the last few days did not transform into a full reversal as some market participants expected. Unfortunately, the coin stopped at the local resistance level of $0.4.
Coincidentally, the psychological resistance level stayed around the 50-day moving average that acts as a serious barrier for assets that are moving in a sharp downtrend. A successful breakthrough would have pushed XRP to the next resistance of the 200-day moving average, resulting in at least a 30% price increase.
As for now, the market expects an accelerated reversal down as the positivity on the industry evaporates, and inflows slowed down significantly.
Main reasons behind end of short-term recovery
There are three fundamental reasons and one technical reason that could have pushed the cryptocurrency market back to the $1 trillion threshold.
The "macro" reason would be the European Central Bank's first rate hike since 2011. The majority of financial analysts were expecting a similar decision from the European regulator, considering the inflation rally that caused the parity of the Euro with the U.S. Dollar, which is something we have not seen for the last 20 years.
In addition to the rate hike that may push some investors away from risky cryptocurrency assets and cause migration toward safer options like bonds, large companies are also getting rid of their digital asset holdings.
Elon Musk's Tesla, in its most recent earnings report, stated that it has sold 75% of its Bitcoin holdings worth approximately $900 million. The news almost immediately caused a 3% drop of Bitcoin and other cryptocurrencies, which makes the fact that the company dropped most of their holdings insignificant.
The technical reason behind the plunge in the cryptocurrency's capitalization market could be that the majority of assets faced resistance levels, including the aforementioned XRP.
Ethereum, Cardano and Solana were trying to break the resistance earlier, as we mentioned in our previous market review. Unfortunately, the lack of inflows and volume prevented cryptocurrencies from going through, which is why we are seeing a short-term reversal today.