Crypto Today: Bears test the mettle of Bitcoin, Ethereum, XRP

Derivatives market signals risk-off

CoinGlass data shows the Open Interest (OI) of the broader cryptocurrency derivatives market is at $201.80 billion, down from $208.30 billion on Monday. The decrease in OI indicates capital outflow as traders cash out, opting to avoid market turbulence.

Adding credence to the thesis that trades are exiting the market, the volumes have surged to $372.07 billion, from $221.40 billion. Typically, the spike in volume with a decline in OI translates to heightened short-covering, or long liquidations in this case.

Crypto market Open Interest. Source: Coinglass

The Open Interest of Bitcoin and XRP took a more than 1% hit over the last 24 hours, approaching $81.41 billion and $7.84 billion, respectively. The ETH OI remains relatively stable at $61.07 billion, suggesting heightened confidence among Ethereum traders.

Open Interests. Source: Coinglass

Bitcoin risks losing its 50-day EMA

Bitcoin trades above $115,000 after a minor dip below this psychological level at press time on Tuesday, holding above the 50-day Exponential Moving Average (EMA) at $115,063. A decisive push below this dynamic support could extend the decline to the $111,980 support level, marked by the May 22 high.

The momentum indicators suggest a loss in bullish momentum. On the daily chart, the Relative Strength Index (RSI) at 45 is in a declining slope, indicating an increase in bearish momentum.

Additionally, the Moving Average Convergence Divergence (MACD) and its signal advance a declining trend after a crossover on Saturday. The rising red histogram bars below the zero line also indicate a surge in bearish momentum.

BTC/USDT daily price chart.

On the other hand, a reversal from the 50-day EMA could propel Bitcoin to the $120,000 supply zone.

Ethereum’s free fall in a rising channel

Ethereum declines by over 0.50% at press time on Tuesday, extending the 3.56% fall from the previous day. The declining trend targets a support trendline formed by connecting the lows of June 22 and August 3.

The support trendline completes a rising channel pattern on the daily chart (shared below) and is located near the $4,000 psychological level.

The MACD crosses below its signal line, providing a sell signal to traders and indicating a bearish momentum shift. Additionally, the RSI at 68 edges below the overbought boundary line, indicating a loss in buying pressure.

ETH/USDT daily price chart.

On the flip side, Ethereum should reclaim the Monday open at $4,472 to reverse the declining trend.

XRP hits a crucial crossroads

Ripple’s XRP is at a crucial juncture, testing the 50-day EMA, a support trendline connected by June 23 and August 3 lows, and the 38.2% Fibonacci retracement level, which is drawn from the June 22 low of $1.90 and the July 18 peak of $3.66, at $2.99.

A decisive close below the support junction could extend the decline to the 50% retracement level at $2.78, with bears targeting the 100-day EMA at $2.72.

The MACD and its signal line continue to decline, approaching the zero line. A wave of red histogram bars from the same line indicates rising bearish momentum.

The RSI at 46 slopes downward, crossing below the midpoint line. This indicates increasing bearish momentum, with further room for correction.

XRP/USDT daily price chart.

Looking up, XRP could bounce back from the support zone to retest the $3.34 resistance, last tested on Thursday.

Open Interest, funding rate FAQs

How does Open Interest affect cryptocurrency prices?

Higher Open Interest is associated with higher liquidity and new capital inflow to the market. This is considered the equivalent of increase in efficiency and the ongoing trend continues. When Open Interest decreases, it is considered a sign of liquidation in the market, investors are leaving and the overall demand for an asset is on a decline, fueling a bearish sentiment among investors.

How does Funding rates affect cryptocurrency prices?

Funding fees bridge the difference between spot prices and prices of futures contracts of an asset by increasing liquidation risks faced by traders. A consistently high and positive funding rate implies there is a bullish sentiment among market participants and there is an expectation of a price hike. A consistently negative funding rate for an asset implies a bearish sentiment, indicating that traders expect the cryptocurrency’s price to fall and a bearish trend reversal is likely to occur.