What factors are driving the altcoin downtrend and when can we expect a change?
In the last month, the cryptocurrency market, especially altcoins, has faced a prolonged downturn and many have experienced surprising losses.
ethereum (eth), the second-largest cryptocurrency by market cap, lost nearly 10% of its value in the last 30 days, trading at around $2,960 as of May 13.
However, ordinals (ORDI) have been the hardest hit, falling 40% and now trading at just $36.80.
This market slowdown aligns with global economic trends, such as recent Decision of the Federal Reserve (Fed) to maintain its interest rates between 5.25% and 5.50%.
The Fed's cautious approach to monetary policy, aimed at addressing inflation and economic growth, may have created uncertainty among cryptocurrency investors, leading them to favor more established assets like bitcoin (btc).
btc has largely traded above $60,000 levels during this downturn, and btc dominance even peaked at nearly 57% in April, a major increase from last year's 45-46% levels. . As of May 13, btc dominance exceeds 55%.
Furthermore, the Federal Reserve's announcement about its strategy of reducing bond holdings, slowing the pace to allow proceeds from maturing bonds to be retired without reinvestment, could signal possible future economic challenges.
This signal may have further reduced investor confidence in altcoins, diverting attention and capital from riskier assets.
As the cryptocurrency market faces this downturn, the question arises: when will altcoins recover? We are going to explore.
What do the experts think?
Analysts have offered a variety of perspectives on the current state of the altcoin market. This is what they think
Patricio H. | CryptointelligenceX
Patric H. remains bullish on the broader market, anticipating a continuation of the bull market through the middle of the third and fourth quarters of 2024.
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However, he warns of a turbulent phase in the short term, especially in May. He predicts a final shakeup in the next 2-6 weeks, possibly revising bitcoin's $52,000 and total market cap's $2 trillion.
He attributes the delay in bottoming to a lack of sufficient pain in the market, indicating that sentiment remains too euphoric.
Patric advises monitoring the Fear and Greed Index for signs of a shift toward “fear.” He also mentions that divergence in sentiment and trading volumes should be monitored, which could suggest a possible reversal.
Benjamin Cowen
Benjamin Cowen draws parallels with the previous cycle and notes that ALT/btc pairs tend to capitulate just before rate cuts. He suggests that ALT/btc pairs could drop another 40% from current levels in the coming months.
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Cowen attributes altcoins' current struggles to a decline in social interest, comparing the current market movement to that of 2019.
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He notes that social interest declined before rate cuts in the past, hinting at a possible bottom for ALT/btc pairs coinciding with a shift in Federal Reserve policy.
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michael van de poppe
Michaël van de Poppe notes that altcoins are seeing a regular correction in USD valuations, but in btc valuations, they have fallen sharply, approaching cycle lows.
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It suggests that this undervaluation presents an opportunity to attack riskier markets rather than shy away from cryptocurrencies.
What to do with that?
These analyzes suggest a cautious outlook for the altcoin market in the near term, indicating that further corrections could be coming.
However, they also point to a possible upward trend in the medium and long term. This means you must stay alert and flexible as the market evolves.
The next few weeks will be important for the altcoin market, with factors such as sentiment, trading volumes, and external economic events likely to have a key impact.
Potential catalysts for market recovery
The cryptocurrency market is at a critical juncture, with potential catalysts that could restore normalcy and revive bullish sentiment.
An important development is the advancement of the Financial Innovation and technology for the 21st Century (FIT21) Act in the United States House of Representatives, which goals to provide regulatory clarity to digital assets.
If passed (could be in May), the bill could establish federal standards for digital assets, clarify the jurisdiction of regulatory bodies such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), and establish a regulatory framework. for digital asset markets.
The cryptocurrency industry has long sought regulatory clarity, and the FIT21 Act could provide much-needed certainty for market participants and investors, potentially boosting confidence and investment in the sector.
Additionally, the bill's provisions to allow trading of digital products in the secondary market and impose requirements on registered entities could improve market transparency and integrity.
Another possible market driver is the upcoming SEC decision on VanEck's spot eth exchange-traded fund (ETF) application, scheduled for May 23, 2024. A favorable decision could spark a rally in eth prices , similar to bitcoin's ETF-driven surge. in early 2024.
Concerns persist regarding the SEC's classification of eth as a commodity or security, which could impact the approval of eth spot ETFs.
Current sentiment surrounding the US spot eth ETF launch is largely bearish, with concerns over regulatory uncertainty and the SEC's stance under Chairman Gary Gensler.
However, industry experts believe that an eth spot ETF will eventually be given the green light, mirroring the path of btc spot ETFs, which initially faced rejections before prevailing in a lawsuit against the SEC.
In the short term, a rejection of the eth Spot ETF could lead to increased price volatility and a drop in eth prices as the market absorbs the news.
Meanwhile, regulatory clarity and approval of spot eth ETFs could fuel altcoin market recovery and bullish trends in the coming months.
eth Price Analysis
As of May 13, ethereum is trading at around $2,970. eth has been following a descending pattern, raising concerns that it may fall below the $2,500 mark.
The recent trend in eth prices has been bearish, with weekly trades opening below the previous week's close, suggesting a lack of bullish momentum.
In the previous 24 hours, eth/USD has been trading positively, breaking above $2,900 levels, but facing solid resistance around the EMA50 at $2,990. For a downtrend to resume, eth needs to break below $2,900, potentially heading towards the $2,800 and $2,620 levels.
On the other hand, a continuation of the rise and a break above $2,990 could lead to further gains to levels of $3,130.
The expected trading range for eth is between $2,800 (support) and $3,050 (resistance), and the trend forecast remains bearish.
eth analysis suggests that prices may face continued downward pressure, which will also affect other altcoins in the market.
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