The crypto market has seen over today’s trading session as large cryptocurrencies retrace as much as 20% during the weekend. A group of expert predicts that the trend towards the downside will continue at least through the week’s end.
The crypto market was trading below $1 trillion at the time this article was written. It could test support again at $920 billion. Risk assets such as cryptocurrencies or equities are being affected by macroeconomic conditions.
Matt Weller from FOREX.com’s Global Head of Research, shared the market update with NewsBTC. The current price action is due to a lower market risk appetite.
The impact of macroeconomic factors on the economy is uncertain. As the market looks for shelter from high inflation, uncertainty and currency fluctuations, the U.S. Dollar Index (DXY Index), has been moving upwards. This negatively impacts other major currencies and crypto assets.
The U.S. dollar’s ascending strength could lead to a decline of 58% in the sector’s total market capital. This would be after a weekly bear flag is formed. According to analyst Caleb Franzen, it could drive the sector to around $400 billion by 2020 and cancel out large portions of its profits during the previous bull run.
You may have seen me sharing this possible bear flag on the livestream. $TOTALCapture crypto market capital.
That would lead to a decline of -58% in the price for $414Bn.
With key structure, lines up
Difficult to see, but worth monitoring as a potential scenario… pic.twitter.com/nleiOsoJ8b
— Caleb Franzen (@CalebFranzen) August 22, 2022
This could translate to Bitcoin’s return to its low 10,000s. According to Weller, Bitcoin saw “durable damage” as its price was pushed from a yearly high of around $48,000 into a yearly low of $18,700.
BTC recovered from those lows and formed a rising channel, but it was rejected by the Exponential Moving Average 50 days (EMA) last Wednesday. As the chart below shows, the price of Bitcoin broke below this channel “leaving a bearish near-term bias for a potential retest of the summer lows near $18,700”.
This is what a crypto crash could do to the prices of large digital assets
For the second cryptocurrency by market Ethereum, an important benchmark for the sector, Weller believes it has seen an “impressive rally”. The cryptocurrency will complete its migration to a Proof-of-Stake (PoS) consensus with “The Merge”, this has supported the bullish momentum.
However, in the short term Ethereum is also trading below its EMA which could push its price back to its “late July swing low near $1,375”, the expert said. As seen below, if bulls can push the price back to its last week’s levels, ETH might re-test that support with the risk to drop to $1,275 and $1,000. Weller also added:
It was impossible to predict a long-term V-shaped bottom for this summer after the deleveraging and blowups that we experienced in May and June. As we flip the calendar into September, the key question for crypto traders may well be whether we go on to break this summer’s lows or merely retest them to set the stage for the next bull cycle.
