Why Crypto Could Heading For A Retest Of The Summer Lows

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 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”.