Why Crypto Could Heading For A Retest Of The Summer Lows

Reynaldo Marquez

2 years ago

3 mins read

Crypto Jobs Remain Attractive Amid Bear Market

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The crypto market has seen over today’s trading session as large cryptocurrencies retrace as much as 20% during the weekend. The near term seems likely to trend to the downside, at least until the end of the week, according to a group of experts.

At the time of writing, the crypto total market broke below the $1 trillion mark and could re-test support at $920 billion. Macro conditions seem to be pushing down risk assets, such as cryptocurrencies and equities,

Crypto total market cap 1 — Crypto total market cap moving sideways on the daily chart. Source: **Tradingview**

In a market update shared with NewsBTC, Matt Weller, Global Head of Research for FOREX.com, and City Index, the current price action across the sector has been triggered by a decrease in risk appetite from market participants.

There is still much uncertainty around macro-economic factors which could be contributing to the latter. The U.S. Dollar (DXY Index) has been pushing upwards, as the market seeks shelter from high inflation and uncertainty, negatively impacting other major currencies, equities, and crypto assets.

If the U.S. dollar continues its ascend, the total market cap for the nascent sector could see a 58% decline by completing a bear flag formed on its weekly chart. As analyst Caleb Franzen said, this could push the sector to its 2020 levels at around $400 billion and take down a large portion of the profits generated during the past bull run.

If you watched the livestream this morning, you saw me share this potential bear flag for $TOTAL crypto market cap.

It would imply a -58% decline to $414Bn.

Lines up with key structure.

Difficult to see, but worth monitoring 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 saw “durable damage” as its price was pushed from a yearly high of around $48,000 into a yearly low of $18,700.

As the price bounced off those lows, BTC formed a rising channel but was rejected of the 50-day Exponential Moving Average (EMA) last week. 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”.

Bitcoin BTC BTCUSDT crypto 3 — Source: Matt Weller, Global Head of Research for FOREX.com and City Index.

What A Crypto Crash Could Do To The Price 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 added:

After the dramatic blowups and deleveraging we saw in May and June, an long-term V-shaped bottom this summer was always unlikely. 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.

Ethereum ETH ETHUSDT crypto 4 — Source: Matt Weller, Global Head of Research for FOREX.com and City Index.

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

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