Bitcoin and most altcoins pulled back on Tuesday, raising concerns among investors about whether the crypto bull run is over.
Bitcoin (BTC) plunged from Monday’s high of $123,200 to $116,600, while the market capitalization of all coins fell by over 3.7% to $3.65 trillion. Some of the worst-performing tokens were Pump (PUMP), Virtuals Protocol (VIRTUAL), SPX6900 (SPX), and Fartcoin (FARTCOIN), respectively.
Bitcoin and most altcoins declined due to profit-taking among investors. It is common for cryptocurrencies and stocks to pull back slightly after going parabolic. For example, BTC reached a record high of $109,389 in January, then pulled back to $74,450 in April.
Cryptocurrencies are also falling as market participants await the outcome of “Crypto Week.” Republicans will consider three bills this week, including CLARITY, GENIUS, and one related to central bank digital currencies.
The GENIUS Act, which passed in a bipartisan manner in the Senate, sets the rules for stablecoins. CLARITY aims to divide the cryptocurrency regulatory roles between the SEC and the CFTC, while the CBDC bill prohibits the Fed from working on these currencies.
Therefore, Bitcoin and altcoins are falling because market participants are not sure whether these bills will pass in Congress. Many of them remember Donald Trump’s “Infrastructure Week” during his first term. His goal was to secure $1 trillion to fund the country’s infrastructure, which did not materialize.
Further, these coins are likely falling due to the concept known as “buy the rumor, sell the news.” Cryptocurrencies surged ahead of “Crypto Week” and are now declining as the event unfolds.
Is the crypto bull run over?
The crypto pullback is also happening due to technical factors. The chart above shows that Bitcoin price formed a shooting star pattern on Monday. This pattern, characterized by a small body and a long upper shadow, is one of the most common bearish reversal signals.
Bitcoin is also falling due to mean reversion, where an asset returns to its historical averages. In this case, BTC surged above $123,000 on Monday, significantly higher than the 100-day moving average of $103,000 and the 50-day average of $108,200. As such, mean reversion suggests that BTC may keep falling to bridge this gap.
Bitcoin also appears to be executing a break-and-retest pattern by moving back to the key support at $110,000. This B&R pattern is a common continuation signal in technical analysis.
Therefore, this is unlikely to mark the end of the crypto bull run. The more probable scenario is that BTC drops to $110,000 and then resumes its uptrend, potentially triggering another rally among altcoins.
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