Why Crypto Market Could See 65% Drop, Expert Says

Reynaldo Marquez

Last Updated: August 17, 2022 4:09 pm

2 mins read

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The crypto market has extended its losses over the past week, as it continues to gain downside momentum. Main cryptocurrencies in the top 10 by market cap are trading in the red with very few preserving some of their gains from last week.

At the time of writing, the crypto total market cap stands at $1.09 trillion with a 2% loss in the 4-hour chart. The sector was rejected at the $1.2 trillion resistance and seems on track to slate more losses in the short term.

Analyst Justin Bennett believes the sector could trend lower if it breaks below support at $760 billion. As seen below, the crypto total market cap has been moving in a channel for over 4 years.

Every time the total market cap touches the top of this channel, cryptocurrencies trend lower. At the time of writing, the sector is a major crossroads and could attempt to re-test support at around $300 billion if downside pressure extends. The analyst said:

Is another 65% drop in the cards for crypto? Don’t rule it out. $760B will continue to be significant for TOTAL. But if that breaks, a retest of this multi-year channel at $370B seems likely.

Crypto Bitcoin JB 1 — Crypto total market cap approaches support level after crucial rejection at the top an important channel. Source: Justin Bennett via Twitter

There are several factors that could contribute to selling pressure across multiple timeframes. Today, the U.S. Federal Reserve (Fed) will speak about the current macro-economic outlook. Depending on the statements from the financial institution’s official, digital assets could experience some relief.

Last week, the U.S. published its Consumer Price Index (CPI) print for July, a metric used to measure inflation in the U.S. dollar. The metric has been trending down and could provide some room for the Fed to ease up on its monetary policy.

Today should provide more clues on the direction the financial took might adopt. At the same time, the crypto market could see an increase in volatility.

What Could Push Crypto Lower

In addition, Bennett noted that the S&P 500 Index is “mimicking” its 2008 crash. At that time, one of the worst crises in recent history pushed the legacy financial system to the brink of collapse.

Bennett believes equities might be moving similarly to 2008 which hints at further losses for risk-on assets, such as cryptocurrencies. As seen below, the S&P 500 might record some gains before moving into its 2008 lows.

Crypto Bitcoin JB 2 — S&P 500 following 2008 trajectory? Source: Justin Bennett via Twitter

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. The analyst 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 was also in a MUCH better position to step in and save markets during both of those crashes.

Still, larger cryptocurrencies such as Bitcoin and Ethereum have been able to sustain key support levels despite macroeconomic conditions. The latter might pull back on its negative effects on digital assets if the Fed pivots its approach to combat inflation with a less aggressive strategy.

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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