The cryptocurrency market has experienced a significant decline in various digital assets in January, with inscription tokens, also known as BRC-20 tokens, such as ORDI and SATS being the most affected.
The decline in these unique tokens’ performance is not solely attributed to Bitcoin’s recent price fluctuations. There are several other factors contributing to their underperformance.
One of the main reasons for the decrease in demand for inscription tokens is the growing “sell the news” sentiment in the crypto market, driven by Bitcoin. The correlation coefficient between ORDI and BTC on January 25th was 0.66, indicating a positive relationship between the two. This sentiment has led to a decline in the prices of ORDI and SATS by approximately 34.50% and 50%, respectively, since the beginning of 2024.
Additionally, the diminishing demand for Bitcoin ordinals is evident in the decrease in inscription fees and Bitcoin block size share. The price movements of inscription tokens closely align with BTC because they utilize Bitcoin’s blockchain. For example, ORDI involves inscribing data directly onto the Bitcoin blockchain, creating a unique form of digital artifact within Bitcoin’s transaction outputs.
Technical conditions have also played a role in the recent price drops of ORDI and SATS. Bearish divergence signals, where the relative strength index (RSI) shows lower highs while the price forms higher highs, were observed on the daily charts of both tokens. This bearish divergence often precedes a price correction, which resulted in a 45% pullback for ORDI and over 60% retreat for SATS.
Looking ahead, ORDI has the potential to decline further in the coming days or weeks. It has undergone an ascending triangle reversal breakdown, indicating a trend reversal rather than a continuation pattern. The breakdown target for ORDI is around $38.50 by February, aligned with the 0.618 Fibonacci retracement line.
On the other hand, SATS has dropped to its support level of $0.00000036, with its RSI indicating oversold conditions. This suggests a potential rebound towards 0.00000043 by February. However, a break below the $0.00000036 support could lead to a crash towards its 0.786 Fib line of $0.0000029.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and analysis before making any investment or trading decisions.