Market Dynamics and On-Chain Data Reveal Causes for Shiba Inu (SHIB) Rally Slowdown

Investor optimism was sparked by Shiba Inu's recent successful breakout from its consolidation phase. Despite this, there has not been a noticeable

Shiba Inu (SHIB) has shown promising signs of recovery in recent weeks, but its rally appears to have stalled, and several market dynamics may be contributing to this slowdown.

Examining on-chain data and market activity can help identify potential reasons behind SHIB’s hindered price movement.

One crucial measure of Shiba Inu market activity is the volume of large transactions and the overall network activity. Compared to previous peaks, the transaction volume has been lower recently.

While the number of large transactions has increased, it is still significantly lower than the levels observed during major bull runs, suggesting less involvement from whales in driving up prices.

Furthermore, profitability data for SHIB holders presents a contrasting sentiment. While the majority of addresses holding SHIB are in the money, there is a possibility that the remaining large group of holders at higher price points might be selling their holdings during this rally, adding to the selling pressure in the market.

The broader state of the market may also be playing a role in Shiba Inu’s underwhelming performance. Assets like Bitcoin, Ethereum and XRP have been grabbing headlines and attracting investor attention.

With substantial inflows and market interest currently observed in these high-cap assets, altcoins like SHIB have less opportunity to shine.

The charts show that SHIB has managed to hold above critical support levels around $0.00002300, but the volume is still relatively low. Without significant buying pressure to fuel a sustained rally, it may be challenging for SHIB to continue seeing substantial price increases.

Bitcoin's paramount level

As Bitcoin hovers around the psychological and technical threshold of $100,000, the market is closely observing the asset’s price action for subtle yet crucial signals. Despite the ongoing bullish momentum hinting at a potential breakout, a concerning sign is emerging in the form of RSI divergence.

The Relative Strength Index (RSI), a momentum oscillator, is currently diverging from the price movements. While Bitcoin price has been reaching new all-time highs, the RSI has been essentially flat or even decreasing, suggesting that the strength of the rally might be waning.

This divergence often precedes a trend reversal, indicating that selling pressure may soon be applied to the asset. RSI divergence has a track record of accurately predicting impending corrections, making this observation significant.

For instance, a similar divergence was observed before a major market correction during the period when Bitcoin rose to its all-time highs in late 2021. While this does not guarantee an immediate pullback, it warrants investor caution.

If a correction unfolds, the 50-day EMA is trending around the $75,000 level, where Bitcoin might test support levels.