Bitcoin lost $60,000 in the short term, beware of the possibility of further decline

Cryptocurrency markets were trading sharply lower on Tuesday.

According to Bitpush data, Bitcoin repeatedly tested the $62,000 support level that day, and started a downward trend after lunch, falling below the $61,000, $60,000 and $59,000 levels in succession, falling nearly $4,000 during the day, falling to nearly $58,000 at its lowest, and rebounding above $59,000 at press time. Ethereum once fell below $2,400 during the day, with a 24-hour drop of more than 10%.

Altcoins fell across the board, with 80% of the top 200 tokens by market cap in the red. Sun (SUN) continued its gains, up 9.6%, followed by Helium (HNT) up 8.5%, and Floki (FLOKI) up 7.1%. Echelon Prime (PRIME) led the decline, down 12.3%, Aragon (ANT) down 7.8%, and Ethena (ENA) down 6.5%.

The current overall market value of cryptocurrencies is $2.07 trillion, and Bitcoin’s market share is 56.2%.

In terms of U.S. stocks, at the close, the S&P 500 and Nasdaq both rose 0.16%, while the Dow Jones was flat.

“The current cryptocurrency market reflects a state of heightened sensitivity, with the Fear & Greed Index oscillating between extremes, highlighting its reactive nature,” said Shubh Varma, co-founder and CEO of Hyblock Capital. “Recently, the index shifted from fear to greed, highlighting how the market continues to react strongly to news and events.”

Varma noted: “Despite this volatility, the overall economic environment remains favorable. Central banks, including the Federal Reserve, have adopted a dovish stance with rate cuts expected soon, and the global liquidity cycle is increasing, which suggests a favorable backdrop for risk assets, including cryptocurrencies. The dovish sentiment at the Jackson Hole Symposium further reinforced this outlook, as evidenced by the large inflows into Bitcoin ETFs, which reported $252 million in net inflows on Friday alone.”

After highlighting the increased volatility of Bitcoin, Varma noted, “Market participants are watching this behavior closely, especially as retail long positions continue to grow. Historically, an increase in long retail positions has been negatively correlated with Bitcoin's price, usually signaling a bearish outlook. Torrents have also shown significant activity, especially in the face of specific news events.”

For example, the arrest of Telegram CEO Pavel Durov led to a sharp drop in TON prices and a large-scale liquidation event. Despite this, TON's open interest still hit a record high, indicating that traders are still actively involved and may try to take advantage of volatility. Varma said: "This behavior shows that even in an uncertain environment, the market is not sitting on the sidelines, but is actively looking for opportunities."

He noted that “liquidity levels play a crucial role in the current market dynamics, especially during the ongoing consolidation phase,” identifying the key liquidity area for Bitcoin as “below $62,000 and around the mid-$58,000 region.”

Varma believes: "Prices may fall to these levels, and a sharp drop in open interest should be closely watched, which may indicate the biggest pain point in the market. So far, most open interest chasing has occurred during price declines, which usually leads to subsequent price rebounds. Traders are keen to take advantage of this pattern. Order book dynamics also provide valuable insights into market sentiment. Currently, there is an imbalance on the supply side, which has historically been a bearish signal."

The analyst said that if Bitcoin loses the $62,000 support and “moves towards a defined liquidation zone, ideally accompanied by a significant drop in open interest, this could represent an attractive opportunity. Furthermore, if the order book imbalance shifts to the demand side, this scenario would create a high-risk, high-reward setup for long positions, especially given the favorable macroeconomic environment.”

Technical chart analyst Greg Michalowski wrote that BTC prices have moved further away from the 100-day and 200-day moving averages that are close to converging, and the upward breakthrough has failed. In addition to the natural support level of $60,000, a break below this level will allow traders to target the 38.2% retracement level from the September 2023 low to the March 2024 high, which is located at $55,124, which is a key position for the long-term downward momentum that investors need to be wary of.