The worst week for the cryptocurrency market since November 2022 is coming to an end as its capitalization attempts to stay above $1 trillion.
Price trends across the cryptocurrency market remained in a downtrend on Aug. 19 as the total market capitalization tries to stay above $1 trillion.
Bitcoin price has also been unable to hold the $26,000 level as the markets moved into the weekend.
Bitcoin leads crypto market losses
The major down-move this week occurred on Aug. 17 following Elon Musk’s SpaceX reportedly writing off its Bitcoin stash as well as several other major reasons.
Bitcoin, which controls nearly 50% of the total cryptocurrency market, reacted negatively to the SpaceX news as the selloff worsened amid a “bloodbath” of mounting liquidations across the crypto derivatives market.
As of Aug. 18, around 176,300 traders had liquidated $1.04 billion worth of contracts, with long exits making almost 80% of it. In other words, a long squeeze forced traders to sell at a loss to avoid even bigger losses.
Macro risks pressure crypto lower
The decline across the crypto market mirrored losses in the global stock market.
Notably, the MSCI World Index, which includes large and mid-cap stocks from twenty-three developed countries, dropped sharply on Aug. 17, as shown in the chart below. This coincided with mounting worries about China’s economy and higher interest rates.
The economic slump in China has raised concerns that their central bank will weaken the yuan to boost its economy — something that could negatively impact the crypto market, particularly in the short term.
The last time China devalued the yuan in August 2015, BTC price dropped by 23% in the following two weeks, while the crypto market lost 27% in the same period.
“Head-and-shoulders” hints at more pain
Meanwhile, the crypto market’s technicals aren’t painting a rosy picture either. The current decline is forming a potential head-and-shoulders (H&S) on the weekly chart, raising anticipations about more losses in 2023.
H&S is a bearish reversal indicator that typically resolves after the price breaks below its support line (or neckline). As of Aug. 18, the crypto market tested the H&S neckline for a potential breakdown move.
If the pattern is plays out, its downside target for 2023’s end or early 2024 will be around $751 billion, down over 25% from the current valuation.
On the other hand, the bulls will attempt a recovery toward the 50-week exponential moving average (50-week EMA; the red wave) near $1.113 trillion in 2023.
Holding the important 200-week EMA (the blue wave) level near $1.08 trillion as support will be crucial for the bulls moving forward.