The crypto market has lost momentum as Bitcoin (BTC), Ethereum (ETH) and Binance Coin (BNB) prices start trading in the negative. The largest cryptocurrencies by market cap could suffer further losses as macroeconomic factors continue to weigh on risky assets.
At the time of writing, the total crypto market cap sits at $1.09 trillion after being rejected at the $1.2 trillion mark. This has resulted in minor losses for Bitcoin (2.2%) and Binance Coin (7%), with only Ethereum holding onto some of its gains over the past week.
BTC price is moving sideways on the 4-hour chart. Source: BTCUSDT trade view
Analyst Justin Bennett believes that the crypto market has been negatively impacted by the US dollar’s bullish trend. The currency experienced a major boost on its monthly chart at the start of 2022 and appears to be attempting to recapture 2022 levels on higher timeframes.
This could lead to further losses in risky assets such as stocks and cryptocurrencies; more economic uncertainty as inflation has trended higher for decades; less liquidity in the global financial markets. Bennett said the following while sharing the chart below:
Expect #stocks and crypto to struggle while the US dollar does. The $DXY just pulled out 107 on its way to 107.40. I still think we’re looking at 112-113. Be careful out there (…). The trend is your friend…unless it’s the $DXY. 112-113 at first, but most likely 120 in the next few months. A rise in the USD means a fall in risky assets.
DXY Index (US Dollar) breaks key resistance on monthly chart. Source: Justin Bennett
The largest crypto by market cap, Bitcoin, posted a low for the year at around $17,600. As NewsBTC reported, Jurrien Timmer, Director of Macro at Fidelity, believes this level is comparable to the cryptocurrency’s previous lows and expects this price point to serve as crucial support.
Will Macro Factors Break Critical Crypto Support?
Using BTC’s supply and demand models, Timmer compared $17,600 to $3,100 and $200, two key support zones for Bitcoin even in sustained downtrends. The expert said the following about BTC’s ability to see more appreciation over the long term, a bullish momentum that will surely propel the entire crypto market higher:
Bitcoin’s price-to-network ratio (my proxy for a valuation multiple) is back to where it was in 2014. Meanwhile, its network continues to grow, roughly along a performance regression curve.
Source: Jurrien Timmer via Twitter
In contrast, Bennett expects further losses for the price of BTC and the crypto market. The first crypto by market cap could be between $9,500 and $13,500.
The expert’s bear market thesis is based on the current monetary policy of the US Federal Reserve (Fed). Bennett believes the financial institution is determined to stop inflation and will continue to raise interest rates to achieve that goal.
Bear market rallies are easy to spot even without a chart. It boils down to a simple question.
Will the Fed ease or tighten?
➡️When it wears off, dips are there to buy
➡️When tightened, rallies are short-lived
The Fed has only just started tightening rates and is unlikely to stop any time soon.
— Justin Bennett (@JustinBennettFX) August 17, 2022
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