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Nexo Logo

LUNA Aftermath: Total Crypto Market More Oversold Than Black Thursday

Tony Spilotro by Tony Spilotro
2 months ago
in Crypto
Reading Time: 3 mins read
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Panic struck the crypto market last week when Bitcoin broke below support, stablecoins unpegged from the dollar, and LUNA dropped to zero. The bloody aftermath has left cryptocurrencies as a whole more oversold than the Black Thursday COVID collapse.

Here is a closer look at the historically oversold conditions in crypto.

Total Crypto Market More Oversold Than Black Thursday

It was a bloodbath in Bitcoin, apocalypse in altcoins. Even stablecoins pegged to the price of the almighty dollar were completely shaken. A nefarious actor or group of actors strategically attacked the dollar-peg of the UST stablecoin, causing a domino effect of algorithmically driven liquidation of reserve assets that included BTC.

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Related Reading | This Expanding Triangle Pattern Could Be The Last Hope For Bitcoin Bulls

Bitcoin plunged through support and many altcoins reached a total drawdown of 80 to 90% or more. LUNA, an asset tied to UST, fell all the way to zero. Billions were wiped out from the total crypto market cap. If there was ever a time to be doubtful about the future of crypto, it might be now. However, market veterans recommend when things become doubtful, you zoom out.

TOTAL_2022-05-18_05-42-23

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The weekly RSI is more oversold than on Black Thursday | Source: CRYPTOCAP-TOTAL on TradingView.com

“When in doubt, zoom out,” holds true in this case. Comparing the recent crypto selloff with Black Thursday, the weekly RSI has reached even more extreme oversold levels. Meanwhile, the Black Thursday candle recorded a 50% drawdown, and the latest correction by contrast barely produced 30%.

By definition, a hidden bullish divergence occurs when an asset’s price sets a higher low, yet the indicator sets a lower low. This often indicates continuation ahead.

 

TOTAL_2022-05-18_05-44-47

Elliott Wave Theory suggest the cycle isn't complete  | Source: CRYPTOCAP-TOTAL on TradingView.com

Could Another 45% Collapse Still Be Ahead?

Elliott Wave Theory could provide clues as to what continuation might look like ahead. The total crypto market cap is also trading within a parallel channel, of which it just touched the bottom of. The upper boundary of the channel is roughly $10 trillion USD.

Related Reading | Bitcoin Bear Market Comparison Says It Is Almost Time For Bull Season

While that fact might be the hope bulls need right now, bears still could have the last laugh. The weekly RSI has now reached the lowest level since the bear market bottom and the fourth lowest in its history on TradingView.

TOTAL_2022-05-18_05-47-16

Only three other times has the total crypto market cap been more oversold  | Source: CRYPTOCAP-TOTAL on TradingView.com

Of the three previous lows set on the weekly RSI, two were bear market bottoms. The remaining low, however, was followed by another 45% plunge to the final bottom. Another 45% drop from here would take the total crypto market cap back to around $600 billion, or below the January 2018 cycle peak.

Simply put, risk is still extremely high, but as oversold conditions increase, so does the potential for reward. Act accordingly.

Follow @TonySpilotroBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com
Tags: bitcoinbtcBTCUSDTcryptoLUNAlunausdLUNAUSDT
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.

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