The crypto market saw during today’s trading session that major cryptocurrencies retraced as much as 20% over the weekend. The short term looks likely to be trending lower, at least through the end of the week, according to a panel of experts.
At the time of writing, the total crypto market has crossed the $1 trillion mark and may retest the support at $920 billion. Macroeconomic conditions seem to drive down risky assets, such as cryptocurrencies and stocks,
In a market update shared with NewsBTC, Matt Weller, global head of research for FOREX.com and City Index, the current price action in the sector has been triggered by a decrease in risk appetite for market players.
There is still a lot of uncertainty around macro-economic factors that could contribute to the latter. The US Dollar (DXY Index) pushed higher as the market seeks protection from high inflation and uncertainty, which negatively impacted other major currencies, stocks and crypto assets.
If the US Dollar continues its ascent, the fledgling sector’s total market capitalization could see a 58% decline as it completes a bear flag formed on its weekly chart. As analyst Caleb Franzen put it, this could push the sector to its 2020 levels at around $400 billion and cut much of the profits generated in the last bull run.
If you watched the livestream this morning, you saw me sharing this potential bear flag for $TOTAL crypto market capitalization.
This would imply a -58% drop to $414 billion.
Aligns with key structure.
Hard to see, but watch out for as a potential scenario… pic.twitter.com/nleiOsoJ8b
— Caleb Franzen (@CalebFranzen) August 22, 2022
For Bitcoin, this could mean a return to the low $10,000s. According to Weller, Bitcoin suffered “lasting damage” as its price fell from a yearly high of around $48,000 to a yearly low of $18,700.
As price bounced off these lows, BTC formed an ascending channel but was rejected from the 50-day exponential moving average (EMA) last week. As shown in the chart below, Bitcoin price broke below this channel “leaving a short-term bearish bias for a potential retest of the summer lows near $18,700.”
What a Crypto Crash Could Do to the Price of Big Digital Assets
For the second cryptocurrency in the Ethereum market, an important benchmark for the sector, Weller believes that it has experienced an “impressive rally”. The cryptocurrency will complete its migration to Proof-of-Stake (PoS) consensus with “The Merge,” which has supported the bullish momentum.
However, in the short term, Ethereum is also trading below its EMA, which could bring its price back to its “end-July low near $1,375,” the expert said. As seen below, if the bulls can bring the price back to its levels of last week, ETH could retest this support with the risk of falling to $1,275 and $1,000. Weller added:
After the dramatic blowouts and deleveraging we saw in May and June, a V-shaped long-term bottom this summer was still unlikely. As we flip the calendar back to September, the key question for crypto traders may well be whether we will continue to break this summer’s lows or simply retest them to set the stage for the next bull cycle.