APE risks crashing into unchartered price territory as it follows Bitcoin and the rest of the crypto market.
ApeCoin (APE) has undergone a sharp recovery after falling to its lowest level in two months. But its strong correlation with Bitcoin (BTC) and U.S. equities amid macro risks suggests more losses could be in store.
APE rebounded by nearly 45% to $7.30 on May 12. The upside retracement move came after APE dropped circa 81% to $5 on May 11, from its record high near $27.50, established on April 28.
The seesaw price action mirrored similar volatile moves elsewhere in the crypto market, led by the chaos around TerraUSD (UST) — an "algorithmic stablecoin" whose value plunged to 23 cents earlier this week, and the Federal Reserve's hawkish response to rising inflation.APE/USD versus USTUSD. Source: TradingView
Meanwhile, the correlation coefficient between ApeCoin and Bitcoin is now around 0.90, suggesting that it's trading nearly in tandem with BTC, which is testing multi-year lows.ApeCoin and Bitcoin daily correlation. Source: TradingView
ApeCoin's rebound occurred near what appears to be a strong technical support level.
Notably, APE is holding above $5.82, which coincides with the 0.786 Fib line of the Fibonacci retracement graph sketched from the $0.97-swing low to the $23.65-swing high. Meanwhile, the token's daily relative strength index's reading is just above its 'oversold' threshold level of 30 — a buy signal.APE/USD daily price chart. Source: TradingView
Therefore, a rebound move from the $5.82-support could have APE test $9.63 (the 0.618 Fib line) as its near-term upside target.
Conversely, an extended breakdown below the support would risk crashing the APE/USD pair into unchartered price territory, confirming that its retracement move was a mere dead cat bounce.
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