Algorand’s [ALGO] value recently experienced a 34% decline, dropping from $0.61 to $0.40. This decrease occurred following a minor increase in Bitcoin’s [BTC] dominance, which temporarily slowed down the momentum of many alternative cryptocurrencies in the market.
Despite the significant liquidation cascade that affected the altcoin sector earlier in December, ALGO managed to stabilize above $0.40. The question now arises: can this price level reverse the current downward trend?
Examining ALGO’s Stability at $0.40
The $0.40 mark served as a crucial support level during late November and has continued to be an essential demand area. However, the recent upward movement from this zone was met with resistance near the peak of the trading range.
Presently, the price has retraced back to this support level. If demand remains low, as indicated by the below-average RSI reading, the price might linger around this zone.
Although there has been an improvement in capital inflows, they have not yet reached a level significant enough to reverse the downward trend. The CMF (Chaikin Money Flow) data for December indicates that inflows remain below zero.
Therefore, a potential bounce at $0.40 may encounter resistance once again near the upper channel ($0.43) if these critical technical indicators do not show signs of improvement.
In the event that selling pressure persists and ALGO breaches the $0.40 support level, the next potential support level could be found at its previous high of $0.33 from March.
Exploring Opportunities for Profit through Shorting
On the 4-hour chart, the SuperTrend indicator has not reset the sell signal that appeared on 9th December. This suggests that shorting ALGO may be more profitable than taking a long position, given the continuation of the downtrend.
The lack of significant demand from the spot market, as indicated by the low CVD spot data, further strengthens the position of short sellers in the market.
To summarize, ALGO has experienced a weakening trend in the last couple of weeks due to increased selling pressure in the market.
For those considering re-entering the market with a bullish stance, a strong rebound at either $0.40 or $0.33 could signify a potential reversal in the price trend. However, such a rebound must be accompanied by robust demand, increased capital flows, and a clear breakthrough above $0.43.
Disclaimer: The opinions expressed in this article are personal and do not constitute financial advice or recommendations for trading or investing.