Despite a sharp decline in the cryptocurrency market capitalization indicator, it managed to make a bullish breakout and turn an important horizontal level into support.
As long as trades are above it, the trend will remain bullish.
Re-testing the former resistance
The cryptocurrency market capitalization indicator (CRYPTOCAP) experienced a collapse in March. This happened 186 days ago and has grown by 186% since then. In early September, another drawdown forced it to return and test the strength of the $300 billion level as support. After that, there was a slight rebound to the ~ $320 billion area, where the indicator is at the time of writing.
Despite the fact that the market again tested the former resistance area as support, technical indicators began to give bearish signals. Stochastic RSI formed a bearish crossover and MACD started to lose momentum. In addition, the RSI is declining, although it is not yet signaling bearish divergence.
However, even if the current movement is considered a correction, based on the height of the previous bullish move (highlighted on the chart), the CRYPTOCAP indicator should mark a maximum of at least $405 billion (here the Fibo level 0.5 of the correction of the entire bearish move is located nearby) or around $587 billion ( where the Fibo level 0.786 passes).
Cryptocurrency trader @Davthewave believes that cryptocurrency market capitalization is strengthening at a rate that exceeds the average growth rate. This could potentially mean that the rally is “running ahead of the locomotive”. However, this graph is unable to predict when the indicator will return to the average value.
Analyzing the daily chart gives us conflicting results. On the one hand, CRYPTOCAP has made a bearish breakout of the upward support line built from the March low. In addition, the RSI slipped below 50 and recognized it as current resistance.
On the other hand, the stochastic RSI has formed a bullish crossover while the MACD is rising.
If the reading recovers above this support line, the trend will remain bullish. The opposite scenario can be realized in the event of a bearish breakout of the current support area.
Cryptocurrency market capitalization excluding Bitcoin (BTC) shows a similar technical picture. However, here we do not see a break below the upward support line, which makes the outlook for the indicator more optimistic.
Thus, the direction of CRYPTOCAP remains unclear. The long-term chart promises that even if the current movement is a correction, the market could reach a maximum of $ 425 billion or even $ 685 billion, and only then will it begin to decline.
Further direction of the trend will help determine how CRYPTOCAP will deal with the nearest levels. A recovery above the upward support line would indicate a bullish trend, and a break below the current support area would indicate a bearish trend.
At the same time, the cryptocurrency market capitalization excluding bitcoin reflects a more positive picture, since the market did not break through the bullish structure here.