Crypto Market Review, August 3

Shiba Inu has finally reached the important 50-day moving average resistance, which will be an important test for the asset over the next few days as it will determine the foreseeable future of SHIB: the continuation of the downtrend or another attempt to rush towards next resistance level.

As we mentioned earlier, Shiba Inu returned the local support level around $0.0000115 thanks to the trend line. The positive price movement allowed the Shiba Inu to continue its path in the local uptrend for another few days or weeks.

Unfortunately, the lack of trading volume and market insight caused a volatility crisis where SHIB hovered in the narrow 5% range for the past few days. For a token like SHIB, the lack of volatility is crucial as speculative traders provide most of the volume for the asset in the market.

Historically, SHIB saw an increase in trading volume and volatility at the start of reversals in the cryptocurrency market. The last rally we saw back on August 15th started before the price increase in major assets like Bitcoin and Ethereum.

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Without general market recovery, we will not see standalone rallies in tokens like Shiba Inu or coins like DOGE.

Institutions are betting on the continuation of the bear market

U.Today has covered a series of articles and opinions issued by institutional giants such as JP Morgan that believe in the continuation of the bear market in the digital asset industry. The main reason is the tight monetary policy in the United States which is pushing down the popularity of risky assets such as cryptocurrencies.

Earlier today, we covered Ethereum technical analysis cited by Bloomberg, which suggested that another plunge is around the corner for the second largest cryptocurrency in the market, given the lack of excitement for the upcoming Merge update.

Financing interest rates will be negative

With the absolute dominance of bears in the market, the funding rate on the largest derivatives platforms such as Binance, FTX and others plunged to negative values, which means that to open a short order you have to pay extra to market participants. This mechanism was created to maintain balance in the market and avoid extreme spikes in volatility.

Despite the lock-in in the market, a large imbalance between short and long orders can sometimes be a sign of an upcoming short squeeze, as we saw back in February 2022.

Due to the lack of resistance in the market, an increase in buying power covers all existing short orders, liquidating them and pushing the price of an asset to extreme values ​​until profit taking cools the rally.

Unfortunately, to initiate a short squeeze at this price and open interest, investors would need to inject billions of dollars of liquidity into the market, which would be a questionable decision under current conditions.

At press time, Ethereum is trading at $1,586, while Bitcoin is still moving in the consolidation area around $20,000. Memetoken and coins like Shiba Inu and DOGE are not showing any serious progress in the market.