US dollar strength may have killed bullish momentum in crypto?
The crypto market has lost momentum as the price of Bitcoin (BTC), Ethereum (ETH) and Binance Coin (BNB) start trading in the red. The largest cryptocurrencies by market capitalization could experience further losses as macroeconomic factors continue to negatively impact asset risk.
At the time of writing, the total market cap for crypto stands at $1.09 trillion after experiencing rejection of $1.2 trillion. This has led to minor losses for Bitcoin (2.2%), and Binance Coin (7%), with only Ethereum managing to preserve some of last week’s gains.
Analyst Justin Bennett believes the crypto market has been negatively affected by the rise in the US dollar. The currency saw a big push to the upside in early 2022 on its monthly chart and appears to be trying to regain 2022 levels on higher timeframes.
This can lead to more losses for assets with risk, such as stocks and cryptocurrencies; more economic uncertainty as inflationary trends increase for decades; less liquidity across global financial markets. Bennett said the following while sharing the diagram below:
Expect #stocks and crypto to struggle as the US dollar does this. $DXY just cleared 107 on its way to 107.40. I still think we see 112-113. Be careful out there (…). The trend is your friend…unless it’s $DXY. 112-113 at first, but most likely 120 in the next few months. USD up means risk assets down.
The largest crypto by market capitalization, Bitcoin, had a yearly low of around $17,600. As NewsBTC reported, Fidelity macro director Jurrien Timmer believes this level is on par with the cryptocurrency’s previous bottoms and expects the price point to act as critical support.
Will macroeconomic factors break a critical support for crypto
Using BTC’s Supply and Demand models, Timmer compared $17,600 to $3,100 and $200, two major support zones for Bitcoin even in sustained downtrends. The expert said the following about BTC’s capacity to see more appreciation in the long term, bullish momentum that will surely push the entire crypto market upwards:
Bitcoin’s price-to-network ratio (my proxy for a valuation multiple) is back to 2014 levels. Meanwhile, the network continues to grow, roughly in line with a power regression curve.
In contrast, Bennett expects more losses for BTC’s price and the crypto market. The first crypto by market cap could bottom between $9,500 to $13,500.
The expert’s bearish thesis is based on the current monetary policy of the US central bank (Fed). The financial institution is intent on stopping inflation from going higher and will continue to raise interest rates, Bennett believes, to achieve that goal.
Bear market rallies are easy to identify even without a chart. It comes down to one simple question.
Does feeding relieve or tighten?
➡️If you take it easy, dips are available to buy
➡️If it gets tight, rallies are short-livedThe Fed has just started tightening and is not likely to stop anytime soon.
— Justin Bennett (@JustinBennettFX) 17 August 2022
