Why the Virtuals Protocol Token Crashed and What to Expect

The VIRTUAL price has imploded, costing investors over $1 billion. After rising to a record high of $5.1250 in January, it has crashed by over 70%

The VIRTUAL price crashed on Friday as the dust settled on the recent record highs. The token crashed by over 70% from its January highs as its price moved to its lowest level since early December. It now trades at about $1.5.

Virtuals Protocol initiatives are not boosting its price

The VIRTUAL price crashed even as the network made several important headlines. First, the network expanded from Base to Solana, the most popular blockchain today. It did that by partnering with LayerZero. As part of its expansion, Vituals Protocol launched a Meteora Pool to enhance trading and engagement.

Virtual has also announced plans to buy back about 13 million tokens from its bonding fees. The goal is to purchase those tokens and incinerate them, a move that will lead to more scarcity for the token, boosting its price. It also dropped after the coin was listed in Upbit, the popular South Korean crypto exchange, and partnered with Illuvium.

Most recently, the AI industry performed well, especially after the launch of DeepBook, the popular Chinese AI company. While the launch led to a strong crash of companies like NVIDIA and Broadcom, it was a good thing for the AI industry because it showed that models can be created cheaply.

Virtuals Protocol is a leading player in the sector as its AI agent generator was used to build popular projects like GAME, aixbt, Luna, Iona, and Olyn.

VIRTUAL price Wyckoff Theory analysis

The best way to explain the VIRTUAL price crash is through the Wyckoff Theory analysis. Wyckoff is a popular theory that identifies four stages that prices go through: accumulation, markup, distribution, and markdown.

The chart above shows that the VIRTUAL price moved horizontally between June last year and November last year. This horizontal move was part of the accumulation process. It then moved to the markup phase that pushed it from below $1 to over $5.2.

The coin has now moved to the distribution and markup phases that are characterized by weak demand and higher supply. These two phases usually happen when smart money investors exit their positions and leave traders holding the bag.

It is likely that the VIRTUAL price has more downside to go as the 50-day and 25-day Exponential Moving Averages (EMA) cross each other. Therefore, the VIRTUAL price will likely keep falling as sellers target the psychological point at $1.0.