It was a sea of red in the crypto market on Saturday as Bitcoin and most digital tokens retreated. Bitcoin dropped below $103,000 for the first time in days, while popular tokens like Pepe, Shiba Inu, Pi Network, and Dogwifhat (WIF) plunged by double digits. This article explores why these tokens dropped.
Altcoins dropped as Bitcoin price stalled
The main reason why altcoins like Pepe, Shiba Inu, Pi Network, and WIF prices have crashed is that Bitcoin has found substantial resistance at the $105,900 level. After rising to that level on May 12, the coin has remained in a tight range as its volume has slumped.
Altcoins often move in the same direction as Bitcoin. Most of them rally when the Bitcoin price is pointing upwards, and fall when it is either dropping or stalling.
However, there are signs that the ongoing Bitcoin price consolidation is calm before the storm, before it bounces back soon. First, the chart below shows that volume of Bitcoin has continued moving downwards. In theory, this is usually a bearish sign. However, in practice, Bitcoin tends to rebound when the volume in the spot and futures market is falling.
Second, this chart shows that Bitcoin has formed two unique bullish chart patterns that will push it higher in the coming weeks. It has formed a bullish pennant pattern that is shown in black in the chart below.
A bullish pennant has a flagpole-like pattern and a symmetrical triangle. In most cases, it normally breaks out when the two lines of the triangle are nearing their confluence level.
Bitcoin has also slowly formed a cup-and-handle pattern whose upper side is at $108,022. This cup has a depth of about 32%, meaning that the coin will eventually surge to over $140,000. The caveat of all this is that the C&H pattern takes a long time to form and complete.
Bitcoin price chart | Source: TradingView
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Altcoins crashed because of profit-taking
Altcoins like Pi Network, Dogwifhat, Shiba Inu, and Pepe also crashed because of profit-taking. That’s because most of these coins were up sharply from their April lows.
Pi Network price surged by over 300% from its lowest point in April and its highest level last week. Shiba Inu price jumped by over 72%, while Pepe Coin was up by over 189% in the same period.
It is common for cryptocurrencies and other assets to pull back after going through a strong rally, especially in a short period of time. This explains why many of these tokens dropped despite no negative headline about them.
The only coin in this list that had a major issue was Pi Network, whose token crashed after the developers unveiled the Pi Network Ventures, a fund that will invest in technology startups using its technology.
While a venture fund is a step in the right direction, analysts believe that Pi is a high-risk asset. For one, it is one of the most centralized cryptocurrencies in the industry.
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Macroeconomic factors
Bitcoin and other altcoin prices dropped as investors reacted to the macroeconomic factors. The most notable one is the latest US credit rating downgrade by Moody’s. In a statement, the company warned that the US finances were moving in the wrong direction. The other two ratings agencies – S&P Global and Fitch – downgraded the US rating in 2011 and 2022, respectively.
There is also noise on tariffs. While the US reached a truce with China and the UK, it left tariffs in place, meaning that there are still heightened recession risks. Also, there are signs that the Federal Reserve will hold rates for longer as inflation remains at an elevated level.
Read more: Why are crypto prices falling, and will they go back up?
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