Hyperliquid (HYPE) Drops 25% Amid Market Cool Down

Hyperliquid (HYPE) is currently experiencing a short-term decline, trading in the red. However, technical analysis suggests that this drop may be followed by a strong rebound. The cryptocurrency market has been cooling down after a sharp recovery earlier this week, triggered by easing geopolitical tensions. Ethereum (ETH), which had rebounded strongly, has now come back to around $2,440.

On the 4-hour chart, HYPE is in the early stages of forming a potential Bearish Bat harmonic pattern. This pattern often hints at price reversals once it completes the CD leg. The move appears to have started from the local high near $45.79. Since then, the price dropped and bounced, forming the XA and AB legs. Currently, the price is working through the BC leg, and if the pattern continues to evolve, it may pull back further to the $32.34 region, which could mark point C.

From that support level, HYPE could begin its CD leg, a potential upward move that may drive the price back toward the Potential Reversal Zone (PRZ) between $44.23 and $45.79. These levels align with the 0.886 and 1.0 Fibonacci extensions, which are classic completion targets for harmonic patterns like the Bat. The key area to watch now is the C point. If HYPE dips to that zone around $32.34 and finds strong support, it could mark the beginning of a rebound toward the PRZ. This move could result in a rally of over 35% from the expected C point.

However, caution is needed. The Bat pattern remains unconfirmed until HYPE completes the C leg and starts moving higher. Also, a breakout above the 100-day moving average, currently acting as resistance, could disrupt the structure and lead to further upside without completing the pattern. The overall trend remains bullish, with the expectation that the price will rebound shortly after the correction. This temporary decline is also expected to attract more buyers, leading to a subsequent rebound as the market corrects itself.

Investors and traders are advised to monitor the market closely during this period. While the mini drop presents an opportunity for those looking to enter the market at a lower price, it also requires caution. The cryptocurrency market is known for its unpredictability, and even the most reliable patterns can sometimes fail to materialize as expected. Therefore, it is crucial to stay informed and make decisions based on a comprehensive analysis of the market conditions.