Hyperliquid Faces 25% Crash Risk as Support Weakens

Hyperliquid, a high-performance Layer-1 blockchain token, is currently facing significant challenges as it risks breaking below the $40.00 support level. The token reached a new record high of $45.72 on Monday but has since declined, trading at $40.13 on Tuesday, marking a drop of over 3.5%. This downturn is attributed to several factors, including increasing volumes and a sharp decline in the derivatives market's Open Interest, which suggests waning interest in HYPE as liquidations mount.

The technical structure of Hyperliquid is showing signs of weakening, with the Moving Average Convergence Divergence (MACD) indicator confirming a sell signal. This signal, coupled with potential profit-taking following the recent price surge and geopolitical tensions in the Middle East, is shifting market sentiment and keeping the broader cryptocurrency market on edge. The conflict between Israel and Iran has added to the uncertainty, further impacting the market dynamics.

QCP Capital's market update highlights the crypto market's resilience in the face of rising geopolitical risks. However, the prolonged losses below the short-term $40.00 support level for Hyperliquid are a concern, especially if the derivatives market Open Interest (OI) continues its downtrend. CoinGlass data shows that OI has declined by nearly 8% to $1.91 billion over the past 24 hours, while the volume surged by more than 54% to $2.89 billion, underscoring the rising liquidations. Approximately $1.77 million was liquidated in the last 24 hours, with long positions leading at $1.23 million compared to roughly $542,000 in shorts.

A persistent drop in OI indicates declining interest in HYPE and a lack of trader conviction in the price discovery phase. The ability of the support at $40.00 to hold will be crucial in determining whether the uptrend can resume or if the market dynamics will shift further. The Relative Strength Index (RSI) swing below overbought territory, heading toward the 50 midline, signals a firm bearish grip. Key areas of interest under the $40.00 zone include tentative support at around $36.00, the 50-day Exponential Moving Average (EMA) at $32.01, and the 100-day EMA at $27.41.

The path of least resistance has shifted downward, accentuated by the sell signal from the MACD indicator on the daily chart. Traders will look for the blue MACD line to cross below the red signal line to ascertain bearish momentum. This sell signal often encourages traders to reduce their exposure to HYPE, which, together with potential profit-taking due to the run-up to new record highs, could accelerate the downswing below the $40.00 support level.

In summary, Hyperliquid is at a critical juncture, with multiple factors contributing to its potential 25% crash risk. The decline in Open Interest, increasing liquidations, and geopolitical tensions are all playing a role in the shifting market dynamics. The ability of the $40.00 support level to hold will be a key indicator of whether Hyperliquid can recover or if it will continue its downward trajectory.

Hyperliquid has posted a potential local top following its recent all-time high, and signs of a healthy correction are beginning to appear. While the overall trend remains bullish, current technical signals suggest the market may be preparing for a retracement, one that could set the stage for the next leg higher if key levels hold.

The pullback is not yet aggressive on Hyperliquid (HYPE), but there is early evidence that a deeper correction could materialize if crucial support levels fail. Traders should monitor how price interacts with the current value area before determining short-term bias.

Key technical points include the Value Area High Support at $0.33, which is the last major breakout level and has been retested. The Critical Support Zone at $0.26 is a confluence of daily level, 0.618 Fibonacci, 200 MA, and POC. The market structure remains bullish, and the correction is considered healthy unless support fails.

Price is currently trading above the $0.33 value area high, which had previously been reclaimed with multiple candle closes. This level served as a breakout point before the latest all-time high was printed. While price remains above this level, bulls are in control, but a loss here could trigger a move toward lower support.

The first major area of interest for a potential higher low lies around $0.26, which carries strong confluence. This zone includes a daily support level, the 0.618 Fibonacci retracement, the upslope of the 200-day moving average, and sits above the point of control. These overlapping supports make it a logical area where bulls may attempt to re-establish trend continuation.

A pullback into this area would represent a correction of more than 25%, which may seem steep, but within a bullish market structure, such corrections are typical and even necessary. A bounce from this zone would confirm the formation of a higher low, a key element in trend continuation.

That said, the value area high at $0.33 remains the last technical defense before this correction scenario becomes active. If bulls can defend it, Hyperliquid may resume its uptrend sooner without visiting lower support.

Hyperliquid is currently at a crossroads. As long as $0.33 holds, continuation higher remains in play. However, if this level is lost, expect a deeper correction toward $0.26. This zone offers an ideal spot for a higher low in the ongoing bull trend. Traders should wait for confirmation at either level before taking new positions.