Hyperliquid crashed below the uptrend it had been building since February, despite the launch of its exchange-traded product, $THYP, which attracted nearly $2 million in funds on its debut on NASDAQ. Hyperliquid’s slippage below the bullish trendline also coincides with entrepreneur Arthur Hayes buying a large portion of HYPE token.
HYPE token loses its psychological resistance at $40
Hyperliquid’s token HYPE lost its bullish shape when it slipped below the $40 level, which is also a psychological level that traders look up to. With the token losing this bullish trend that it built since February, the crypto market is now in a spot of bother as it caught the traders off guard.
In terms of short-term trading, now risk management seems to be the priority more than anything else. The majority of traders will wait to see if HYPE breaks through the $40 resistance point and makes it a support again before considering going long again.
A fast recovery above this area would be an indication that this breakdown was just a false breakout meant to lure out the weaker players. In case the coin continues forming lower lows and lower highs, traders might shift their positions to stablecoins or minimize risks until there is a better structure formed.
As far as long-term investing goes, things may look different in this particular case. Corrections following a powerful uptrend are normal behavior for cryptocurrencies, especially when sentiment turns excessively positive. Long-term investors will observe how volume behaves along with how price reacts at the level of support points. Should the buyers show up and form a base again, the asset may try making its recovery once again.
HYPE loses momentum despite its ETP pulling in funds
HYPE’s failure to hold above the bullish trendline comes in the wake of its ETP pulling in nearly $2 million in funds on the first day of trading. Hyperliquid’s ETF (THYP) was introduced by 21 Shares, a crypto asset management company.
When THYP debuted on NASDAQ on 12 May, it raised more than $1.8 million by the end of the day. Bloomberg analyst James Seyffart, who tracked the launch throughout the trading session stated that about two and a half hours after markets opened, THYP had already reached roughly $750,000 in trading volume.
Although the THYP ETP attracted nearly $2 million during its debut, the price of still declined, showing that institutional inflows do not always translate into immediate bullish price action. The relationship between HYPE and the ETP is indirect but important.
The correlation between the ETP (THY) and HYPE
This means that there is some potential that investor interest in the ETP will lead to increased interest in the underlying token eventually if the issuer needs to buy more tokens to cover their inflows. This can help boost the liquidity, visibility, and participation in the asset in the long run.
Nonetheless, the short-term outlook is expected to be different. The hype behind the THYP token launch was largely priced in by the markets even before the launch itself took place.
Those traders who had bought the HYPE prior to the announcement made substantial profits and, in the meantime, market sentiment, leverage positions, and technical resistance points can easily overwhelm any bullish signals related to the ETF/ETP in question.
The reason why ETP launches tend to be viewed positively is due to opening an asset to an entirely new group of investors that don’t necessarily wish to trade with cryptocurrencies or work with the wallets and other technical components. Instead, by using regular brokerage accounts, investors get exposure to the asset of interest. Over time, this may result in a consistent flow of funds and increased legitimacy of the ecosystem as a whole.
Arthur Hayes’ shilling fails to boost HYPE
HYPE’s crash comes despite American entrepreneur Arthur Hayes’s valiant effort to boost the price. According to Binance, Arthur publicly stated that he bought a large amount of $$HYPE round the $30–35 range and believes the target could reach $150.
When looking at the price action of HYPE, it is trading inside a rising wedge, making higher highs and higher lows as the range of price action declines.
When looking at the price action of HYPE , it is currently trading inside a rising wedge pattern, where price continues to print higher highs and higher lows, but the overall range is tightening.
Rising wedge may look bullish but it’s far from it
This creates the illusion of strength because the market is still moving upward, but in reality, each push higher is becoming weaker and less sustainable. The reason higher highs are still forming is because buyers are aggressively stepping in on dips, but at the same time, sellers are becoming more active at progressively lower levels of resistance, compressing the structure.
Within this configuration, there will be a split within the behavior of traders. The short-term traders would be adding to the pullbacks, hoping for the continuation of the upward trend while the early investors and swing traders would start booking their profits.
This would create a scenario wherein buying and selling are still being executed, but the momentum is slowly losing strength with reduced volatility. Volume would usually fall off as the wedge develops further.
Eventually, this compression cannot sustain itself. A rising wedge is generally considered a bearish reversal or exhaustion pattern, meaning it often resolves with a breakdown below the lower trendline.
When the sellers are successful in gaining the initiative, there could be a significant fall in prices due to the triggering of the stops below the wedge support line. On the other hand, should the buyers regain their strength and breach the top boundary line with high volumes, a breakout will happen, but more often than not, the more prevalent scenario would be a bearish breakout.