- Shiba Inu corrected by over 30% after logging its record high on Wednesday.
- A Bloomberg analyst believes the meme cryptocurrency’s correction further would have traders rotate profits into the Bitcoin market.
- Technicals show Bitcoin would hit $67,000 in the coming session.
YEREVAN (CoinChapter.com) — Shiba Inu (SHIB), a Dogecoin-inspired meme cryptocurrency, rallied by more than 1,100% in October to establish a record high at $0.00008854, but later wiped off up to around 30% of those gains in a correction move later.
Traders flocked to seek exposure in the Shiba Inu market, in part on hopes that Robinhood — a U.S.-based zero-fee trading app with 17.7 million monthly active users — would add SHIB to its service portfolio. Meanwhile, Shiba Inu’s recent foray into decentralized finance (DeFi) and nonfungible token (NFT) sectors with new product launches also kept its bullish prospects intact.
But as SHIB corrected from its all-time highs, it also alerted traders about its overvalued nature. In detail, traders started selling their SHIB mainly because of their intention to lock their profits before a major price dump. Such moves are commonplace among financial instruments that rally too quickly for their own good, but crash as bids for higher levels stops entering market orders.
Capital rotation from Shiba Inu to Bitcoin
As a result, those selling the overvalued asset make profits in the underlying currency, typically the U.S. dollar. But in the cryptocurrency sector, many traders prefer to rotate their profits into the leading cryptocurrency, Bitcoin. As a result, the cost to purchase one Bitcoin rises in the dollar-terms.
Mike McGlone, the senior commodity strategist at Bloomberg Index, believes that the crypto market is about to witness a similar phenomenon in the days ahead.
“Dogecoin copycat Shiba Inu has some brilliance in design and marketing for NGU (Number Go Up) technology, but when the game is up for the speculative meme token, risk-off sentiment is likely to prevail in the crypto market and solidifies Bitcoin’s status,”he tweeted Friday.
Bitcoin, whose prices almost doubled in October and reached an all-time high of almost $67,000, also gave up a portion of those gains. In detail, the cryptocurrency fell to as low as $58,100 on Coinbase but reclaimed $60,000, a psychological level, as support afterward. It was trading around $61,500 at press time.
At least technicals agree with McGlone’s views of Shiba Inu’s bulls rotating their profits into the Bitcoin market. The BTC/USD exchange rate has been forming what appears to be a bull flag pattern while holding the $58,000-60,000 area as support. Should the price hold above the floor, it will likely bounce back to retest its record high near $67,000.
Conversely, slipping below $58,000 would risk crashing Bitcoin towards the next support level near $52,700.