Cryptocurrency News Today: Why the Cryptocurrency Market Is Falling

cryptocurrency falling
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Cryptocurrencies Are Caught in a Correction

The cryptocurrency market is falling, which was completely contrary to the price action that characterized all of last year. 2017 was a milestone year for cryptocurrencies as the entire complex made a monumental move to the upside. The total cryptocurrency market cap began that year at $18.0 billion and it ballooned to a market cap of $612.0 billion by the end of the year. 2018 started off much like 2017 ended; all the enthusiasm and hot money that flooded and fueled the bullish run in 2017 continued to pour into the market, pushing cryptocurrency values higher.

These gains came to an end on January 7, 2018. The recent move toward higher valuations was slightly out of the ordinary because this was the first time that the complex appreciated and Bitcoin did not follow suit. After peaking, the entire complex began to turn, and then all of a sudden, a violent correction gripped the cryptocurrency market.

I have reason to believe that the correction that gripped this market is still in effect. I will substantiate my claims by illustrating that a very influential momentum indicator known as the moving average convergence/divergence (MACD) indicator is currently suggesting that Bitcoin prices, Ethereum prices, Ripple prices, and Litecoin prices are being influenced by bearish momentum and that the path of least resistance continues to be geared toward lower prices.

Before I move forward, I need to explain exactly what the MACD indicator measures. MACD is a simple yet effective trend-following momentum indicator that illustrates whether bullish or bearish momentum is influencing the price action in a cryptocurrency.

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A bullish MACD cross implies that bullish momentum is influencing the price action and that the path of least resistance is therefore geared toward higher prices. A bearish MACD cross implies that bearish momentum is influencing the price action and that the path of least resistance is therefore geared toward lower prices.

The special factor regarding momentum is that price action cannot sustain a move in either direction unless the applicable momentum is supporting it. That is why the MACD indicator is very influential. You do not need to take my word for it because the following cryptocurrency price charts have been annotated in order to illustrate the significance of the MACD indicator and momentum.

Bitcoin Prices

The following Bitcoin price chart illustrates the influence that the MACD indicator has on the BTC price.

bitcoin price chart

Chart courtesy of TradingView.com

In April 2017, a bullish MACD cross was generated, and this marked the beginning of the accelerated move toward higher BTC prices. In both July and September, a bearish cross was averted. In response, the trend toward higher prices continued to accelerate.

The entire time the MACD signal lines were in bullish alignment, Bitcoin prices appreciated from $1,189 to a high of $19,000, representing a stellar 1,497.98% return over that time frame. This example illustrates that while a bullish MACD cross is in play, Bitcoin prices are geared toward higher prices.

The bullish implications suggested by the MACD signal were finally subdued when a bearish MACD cross was generated in January 2018. The Bitcoin price has been correcting ever since. Due to the nature of this signal and its implied bearish momentum, I can only assume that as long as the MACD indicator remains in bearish alignment, the correction in BTC prices is still running its course because the path of least resistance is geared toward such an outcome.

Only when a bullish MACD cross is generated will it suggest that this correction has finally run its course and that higher Bitcoin prices can finally prevail.

Ethereum Prices

The following Ethereum price chart illustrates the influence that the MACD indicator has on the ETH price.

ethereum price chart

Chart courtesy of TradingView.com

In March, a bullish MACD cross was generated, marking the beginning of an accelerated move toward higher ETH prices. Higher ETH prices prevailed and Ethereum prices peaked in June, at a price of $420.00, before a bearish cross was generated.

The bearish MACD cross was generated in July and was true to its nature; the Ethereum price refrained from advancing because bearish momentum was preventing it. The inability to advance was because momentum was creating a path of least resistance geared toward lower prices.

This sideways move persisted until November, when a bullish MACD cross was finally generated, implying that bullish momentum was once again influencing the price action in ETH. Appropriately and as expected, Ethereum prices appreciated until they peaked at $1,419, registering an outstanding 330% return since the MACD cross was generated.

A bearish MACD cross was just generated this week, and it implies that Ethereum prices are currently geared toward lower prices. Therefore, as long as this indication is in bearish alignment, I can only assume that a correction is running its course. Only when a bullish MACD cross is generated will higher prices finally prevail.

Ripple Prices

The following Ripple price chart illustrates the influence that the MACD indicator has on the XRP price.

ripple price chart

Chart courtesy of TradingView.com

In March 2017, a bullish MACD cross was generated. Just like the cryptocurrencies that came before it, this marked the beginning of an accelerated move toward higher XRP prices.

This initial MACD bullish cross was responsible for capturing a gain of 4,500% before a bearish MACD cross was generated, implying that the accelerated move toward higher XRP prices had concluded and that Ripple prices were correcting.

This corrective price action lasted five months before a bullish MACD cross was finally generated in December 2017. Once again, Ripple prices accelerated higher. This time around, Ripple tacked on 483.33% in gains before the XRP price peaked.

Currently, the MACD indicator is in bearish alignment because a bearish MACD cross was generated in February 2018. As long as this indication remains in bearish alignment, the path of least resistance will be geared toward lower prices and I can only assume that a correction is currently playing out. The bearish implications suggested by the MACD cross will finally be negated once a bullish MACD cross is generated, which will suggest that another move toward higher prices is once again in development.

Litecoin Prices

The following Litecoin price chart illustrates the influence that the MACD indicator has on the LTC price.

litecoin price chart

Chart courtesy of TradingView.com

In April 2017, a bullish MACD cross was generated and marked the start of the accelerated move toward higher LTC price. While this indication was in bullish alignment, Litecoin prices appreciated to the tune of 525% before a bearish MACD cross was generated in September.

This bearish MACD cross did not last long; in November 2017, a bullish MACD cross was generated and Litecoin prices were once again accelerating toward higher prices. From November to December, the LTC price appreciated to the tune of 372%.

At the end of January 2018, a bearish MACD cross was generated. True to its nature, Litecoin prices have been correcting because lower prices continue to be the path of least resistance.

I can only assume that Litecoin prices will continue to correct and that the LTC price is unlikely to make a substantial and sustained move toward higher prices until a bullish MACD cross is generated.

Final Thoughts

All the cryptocurrencies that have been highlighted in this report have the exact same thing in common; they all adhere to and are obedient to the implications suggested by the MACD indicator. These were all prime examples of the influence that momentum can have on the price of cryptocurrencies. Therefore, it is fair to say that it is important to know whether bullish or bearish momentum is influencing the price action of a cryptocurrency.

When it comes to the MACD indicator, Bitcoin has produced the least amount of indications. Therefore, I am inclined to call it the leader of the pack. Given its dominance and weight, that title is well-suited. I would pay close attention to the Bitcoin price chart and wait for the generation of a bullish MACD cross before I assume that the selling pressure currently gripping the cryptocurrency market has finally subsided. Once this indication is generated, I will have the inclination to believe that higher cryptocurrency prices are finally ready to prevail.

Analyst Take

The entire cryptocurrency market is falling and the MACD indicator is currently suggesting that the heavyweights like Bitcoin, Ripple, Litecoin, and Ethereum are all in correction mode. Until a bullish cross is generated, the path of least resistance will be geared toward lower prices, so lower prices should, therefore, be an expectation.