Here’s why ApeCoin has suffered a harsh reversal

The ApeCoin token experienced a sharp reversal on October 22, erasing some of the gains made in the previous five days.

ApeCoin (APE), owned by Yuga Labs, creators of Bored Ape Yacht Club, is down nearly 20% from this week’s high to $1.44. Despite this decline, it remains 200% above its August low.

The crash occurred two days after Yuga Labs launched its highly anticipated layer 3 network, ApeChain, on Arbitrum One. ApeChain allows developers to create applications in industries such as gaming, decentralized finance, and non-fungible tokens.

Additionally, ApeChain allows ApeCoin holders to earn returns by staking APE tokens; This is a process where users transfer their tokens to secure the network and earn rewards in return.

ApeCoin’s unique feature is its automatic return mode, which allows tokens to be reinvested automatically, maximizing returns.

Yuga Labs hopes that ApeChain will help expand its ecosystem at a time when the Bored Ape Yacht Club is struggling.

Data from CryptoSlam shows that BAYC sales have dropped significantly this year, with total sales falling from $41 million in March to $7.1 million in September. At its peak in January 2021, BAYC’s sales were $346 million.

ApeCoin’s price drop can be attributed to two main factors. First, the decline occurred as investors “sold the news.” Typically, assets rise before and immediately after a major event, then pull back as some investors take profits.

Secondly, the price of APE fell as investors predicted further challenges for ApeChain, given the highly saturated tier 1, 2 and 3 industries.

Additionally, the sell-off was also affected by general weakness in the crypto market. Bitcoin (BTC) fell to $67,000 after reaching $69,300 on October 21, while the total market value of all cryptocurrencies fell 3% to $2.43 trillion.

ApeCoin price created a rotating ApeCoin price chart | Chart by TradingView

The APE token rose to $1,754 on Monday, a few points below the 61.8% Fibonacci Retracement point. It then formed a rotating candlestick, characterized by a small body and long upper and lower shadows. While this is usually a neutral pattern, it can also be a sign of a reversal.

ApeCoin remains above the 50-day and 200-day Exponential Moving Averages and the 38.2% Fibonacci Retracement point. Therefore, the token may continue to decline and retest the 200-day moving average at $0.980. This view will be invalidated if the token rises above this week’s high of $1,754.