Crypto Markets Show Little Signs of Recovery Despite Oversold Conditions

Cryptocurrency prices continued to trade near 14-month lows on Saturday, as damaged investor sentiment and dwindling trade volumes kept market activity subdued. While most cryptoassets are severely oversold based on the relative strength index (RSI), a short-term bounce seems less likely to materialize as the search for an elusive bottom continues.

Market Update

The combined value of all cryptocurrencies is currently $138.7 billion, up slightly from Friday’s 14-month low. Over the past 24 hours, the market cap peaked at $142.6 billion before retreating overnight to current levels. Trade volumes have also fallen by roughly $3 billion over that stretch.

Most major assets in the top-20 were down slightly compared with Friday. Bitcoin touched an intraday low of $4,210 on Coinbase and has recovered only modestly from that level. At the time of writing, the San Francisco-based exchange was quoting a price of $4,230, down 1.2% from the previous day.

Bitfinex, another leading digital currency exchange, is quoting a bitcoin price of $4,365. Bitcoin routinely trades at a large premium on Bitfinex, likely due to the preponderance of BTC/USDT trades executed on the platform.

Aggregate data provided by CoinMarketCap shows an average bitcoin price of $4,306.

XRP, which is now the second-largest cryptocurrency by market cap, fell 1.5% to $0.4038. Ether’s price was little changed at $122. Bitcoin cash dipped 1.6% to $205 and Stellar XLM lost 1.6% to $0.1776.

Have We Found a Bottom?

The crypto flash crash has sparked widespread fears that bitcoin and the broader market may never fully recover. The price collapse also put an end to months of stability that saw bitcoin trade in a far more predictable range, largely aided by futures contracts offered by CBOE and CME.

According to economist Alex Kruger, bitcoin may have finally reached a bottom after prices breached oversold conditions on the daily charts.

“Yesterday, BTC triggered my main oversold signal on the daily,” Kruger tweeted on Saturday. “This signal printed only once before: Jan/17/2015. Very close to a bottom that held for eight months, and was breached only once ever after, briefly, during the Aug/18/2015 flash crash.”

While the presence of historical data make technical analysis more relevant to cryptocurrency traders, the recent flash crash has defied logic. This usually occurs when market participants capitulate and begin closing out long-term positions. As CCN reported last week, investors who purchased bitcoin at $1,000 began selling their stakes during the latest selloff. At the same time, the number of traders shorting bitcoin through the futures market rose to a record high last week, setting the stage for a volatile end to the month ahead of the CME contract expiry.

Based on these factors, the search for an elusive bottom in bitcoin and the broader market will likely continue next week. In the meantime, investors are reminded that bitcoin experienced worse selloffs over its short history and has come back stronger each time. The major difference this time around is the size of the market and the number of eyeballs observing it.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi