Crypto Market Review, August 12
Most altcoins and Bitcoin lose up to 5% of their value as the market targets potential upcoming correction
Despite booming Ethereum, rallying Bitcoin and solid performance of alternative L1s, the cryptocurrency market closes the week in the red, which could be an important sign for investors who got overconfident and started betting on another bull run.
Ethereum gains evaporate
After the successful test of the merger on the Ethereum testnet, the price of the second largest currency has not shown any peak in market capitalization and even fell below the local support level of $1,900, which caused some confusion among investors who were already aiming for a full reversal .
The reversal was most likely caused by the psychological fact that investors were ready to push the price of the asset before receiving the news of the successful test. Based on this phenomenon, the rule “buy the rumor, sell the news” was created.
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US dollars can bring some problems
The positive inflation data caused a massive drop in the value of the US dollar as the market began to price the soft landing and the end of the rate hike cycle that was the main fuel for the US Dollar’s rally and also pushed cryptocurrencies and other assets tailored to the USD down.
Since January, the DXY – which reflects the real “power” of the currency has increased by around 11% in value – showing that the US currency is currently on a strong rise, which is a factor that strongly affects financial markets.
Currently, DXY reached the local support level of the 50-day moving average which acts as an indicator: according to it, the market will decide whether the short-term bull run will continue next week or we will see another correction cycle due to the USD.
Cardano and other L1s are in red
As a large part of the market entered a correction, alternative L1 chains followed larger networks such as Bitcoin and Ethereum, losing from 1% to 5% of their values in the last 24 hours despite massive gains during the week.
Cardano (ADA) lost around 4% of its value since the local high and is now moving to the local support zone, which correlates with both the trendline and the 50-day moving average. In the event of a failed return of the US dollar, ADA will most likely follow the majority of the cryptocurrency market and continue its movement in a rising territory.
The biggest loser in the last 24 hours is Lido Finance which at this point becomes a riskier option to receive exposure to Ethereum as Lido DAO remains one of the largest holders of stETH tokens representing staked Ethereum coins after the Merge update.
