Algorand (ALGO) Price Prediction 2023- Will This Support Level Reverse the Ongoing Downtrend?

Algorand's [ALGO] price pullback hit 34% after dropping from $0.61 to $0.40. The decline followed a slight strengthening of Bitcoin's [BTC] dominance

Algorand’s (ALGO) price action has seen a pullback of 34%, dropping from $0.61 to $0.40. This decline can be attributed to a slight increase in Bitcoin’s (BTC) dominance, which has paused the momentum of most altcoins, albeit temporarily.

ALGO’s price managed to stabilize above the $0.40 level during the early December liquidation cascade, which had a massive impact on the altcoin sector. The question remains whether this level will be sufficient to reverse the ongoing downtrend.

ALGO 4-hour chart highlights key technical levels and indicators (Source: TradingView)

ALGO’s critical support level at $0.40 also aligns with the price imbalance set in late November, serving as a key demand zone. However, the last strong bounce from the zone (marked in cyan) was met with a price rejection at the upper channel.

At press time, the price action had returned to the zone and might continue to hold this level considering the low demand, which is evident from the below-average RSI reading.

Moreover, capital inflows showed improvement but remained short of the key level to aid in reversing the downtrend. In fact, as per the Chaikin Money Flow (CMF), capital inflows for December were still below the zero level.

Overall, a bounce at $0.4 might encounter another price rejection at the upper channel ($0.43) if these crucial technical indicators remain subdued.

If the selling pressure intensifies and ALGO breaches the $0.40 support, the next level of respite could be at ALGO’s March highs of $0.33.

Shorting could yield gains (Source: Coinalyze)

On the 4-hour chart, the SuperTrend had not yet reset the sell signal that was flagged on 9 December. This indicated that shorting ALGO could be more lucrative than going long as its downtrend continued.

The lack of demand from the spot market, as reinforced by the low CVD spot, further supported the edge for short sellers in the market.