As the market continues to lose ground, crypto has seen its losses increase over the last week. Major cryptocurrencies that make up the 10 largest market caps are in the red and very few have retained some of last week’s gains.
As of this writing, crypto’s total market cap is $1.09 Trillion with a 2.2% drop in 4-hour charts. It was rejected by the $1.2 Trillion resistance, and it appears that the sector will suffer more short-term losses.
Justin Bennett analyst thinks the sector will trend lower if it falls below $760 million support. Below you can see that the total crypto market cap has been in motion for more than 4 years.
The trend for cryptocurrency falls whenever the market cap total reaches the peak of this channel. According to the analyst, this sector has reached a critical crossroads. If downside pressure continues, it could attempt to retest support at $300 billion. According to the analyst:
Are there any other 65% drops in crypto-related spending? Don’t rule it out. $760B is still significant to TOTAL. If that happens, however, an attempt to retest this channel over the next three years at $370B is possible.
Selling pressure can be caused by many factors. Today’s U.S. Federal Reserve speech will focus on the current macro-economic outlook. Depending on the statements from the financial institution’s official, digital assets could experience some relief.
The U.S. released its July Consumer Price Index (CPI), a measure of inflation in the U.S. Dollar, last week. It has been trending lower and could allow for some flexibility in the Fed’s monetary policy.
The financial industry will be looking for clues today to help them decide which direction they might take. The crypto market may also experience volatility.
What could cause crypto to fall?
In addition, Bennett noted that the S&P 500 Index is “mimicking” its 2008 crash. That was when the financial system of the past fell prey to one of its worst crises.
Bennett thinks equities may be trending in the same direction as 2008, which could lead to further losses for risk-on asset such as cryptocurrency. As seen below, the S&P 500 might record some gains before moving into its 2008 lows.
In that sense, Bennett said that the bottom “is not if for stock or crypto” while he contemplates the possibility of a “devasting crash” in the nascent asset class. He added:
And if that doesn’t seem possible, know that the S&P dropped 50% during the 2000 crash and 57% in 2008. The Fed also had a much better chance of saving markets in both crashes.
Even though macroeconomic conditions are difficult, larger cryptos like Bitcoin or Ethereum were able to keep their support levels high despite this. This could lead to the Fed adopting a less aggressive approach to fighting inflation and allowing digital assets to recover from its adverse effects.