Why did Bitcoin serial number inscription tokens ORDI and SATS collapse?

So far in 2024, the performance of Inscription Tokens ORDI and SATS has lagged behind the overall cryptocurrency market and shows signs of further decline.

In January, the entire cryptocurrency market experienced significant declines in multiple digital assets, including the worst-affected Inscription Tokens (also known as BRC-20 tokens) ORDI and SATS.

The lackluster performance of these unique tokens is not only influenced by Bitcoin’s recent price volatility, but also by several other key factors.

Reduced need for inscriptions

It is worth noting that as of 2024, the prices of ORDI and SATS have experienced a decline of approximately 34.50% and 50%, respectively.

In addition to this, the downward trend also coincides with a significant decrease in inscription fees and Bitcoin’s block size share, highlighting the weakening demand for Bitcoin’s ordinals.

The price trends of Inscription tokens are often closely correlated with BTC, mainly because the Bitcoin Ordinal is directly dependent on Bitcoin's blockchain. For example, ORDI's operations involve writing data directly to the Bitcoin blockchain, creating a unique form of digital artifact that exists in the output of Bitcoin transactions.

Technical conditions

Aside from the broader market trends, a key factor behind the recent decline in ORDI and SATS prices is the emergence of a bearish divergence signal.

Taking ORDI as an example, its daily chart with USDT shows a typical bearish divergence pattern from December 5, 2023 to January 2, 2024. In simple terms, ORDI's price has formed higher highs, but its relative strength index (RSI) has shown signs of turning lower.

The subsequent 45% retracement was consistent with a bearish divergence signal, where the divergence between the RSI and price action preceded a correction in price.

Likewise, for SATS, its price experienced a bearish divergence signal of rising price and falling RSI during an uptrend, which resulted in a decline of more than 60%.

Overall, the bearish divergence on both the ORDI and SATS charts is worth watching for traders as it suggests a potential trend reversal, or at least a temporary interruption to the current uptrend.