The cryptocurrency market has seen a notable drop in several digital assets in January, with inscription tokens — aka BRC-20 tokens — such as ORDI and SATS among the most affected.
Inscription tokens’ performance. Source: CoinMarketCap
The reasons behind the underperformance of these unique tokens include several other important factors in addition to Bitcoin’s (BTC) recent price fluctuations.
Lower demand for inscriptions
Notably, the price of ORDI and SATS has fallen by approximately 34.50% and 50%, respectively, so far in 2024.
ORDI, SATS, BTC and crypto market’s daily performance comparison chart. Source: TradingView
The decline has appeared primarily due to a mounting “sell the news” sentiment across the crypto market, led by Bitcoin. As of Jan. 25, the correlation coefficient between ORDI and BTC was 0.66; it has remained positive throughout recent history.
ORDI/USDT and BTC/USDT daily correlation coefficient performance. Source: TradingView
Furthermore, this bearish momentum has aligned with a noticeable decrease in inscription fees and Bitcoin block size share, highlighting a diminishing demand for Bitcoin ordinals.
Bitcoin inscription fees. Source: Glassnode
The price movements of inscription tokens tend to closely align with BTC itself, largely because Bitcoin Ordinals uses Bitcoin’s blockchain.
ORDI, for example, involves inscribing data directly onto the Bitcoin blockchain, creating a unique form of digital artifact that exists within Bitcoin’s transaction outputs.
Technical conditions
In addition to broader market trends, bearish divergence signals were key in recent ORDI and SATS price drops.
For instance, the ORDI/USDT daily chart exhibited a classic bearish divergence pattern between Dec. 5, 2023, and Jan. 2, 2024. Simply put, ORDI’s price was forming higher highs, but its relative strength index (RSI) was making lower highs.
ORDI/USDT daily price chart. Source: TradingView
The following 45% pullback was consistent with the bearish divergence signal, where the discrepancy between the RSI and the price action precedes a price correction.
Similarly, SATS’s price retreated by over 60%…
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