Crypto has dropped below the $1 trillion total market capitalization and has returned to its January 2021 levels. At that time, the sector was preparing for a massive bull run that would take its market cap above the $3 trillion.
This time the sector seems to be threatening further losses and for a potential new leg down into its 2020 levels. At the time of writing, the total crypto market cap stands at $870 billion and continues to trend to the downside on the daily chart.
Analyst Justin Bennett believes the sector will “imminently” take a leg lower. He expects the market to find support at $730 billion as it was unable to hold above the $860 billion mark.
The current market conditions, the shift in the U.S. Federal Reserve (Fed) monetary policy, the relentless selling pressure, and the series of negative news in the space seem to support this thesis. Sharing the chart below, Bennett said:
The next leg lower looks imminent. This is where we’re probably going. Another 15-25% to reach the TOTAL confluence of support and measured objective. Expect a 30% drop for most altcoins.
As usual, Bitcoin holds the key for the entire crypto sector as most altcoins tend to follow BTC’s price action. Bennett claims the number one crypto by the market could see a similar 15%-25% drawdown if it breaks the $20,000 area.
This would send BTC’s price to its next critical support zone at around $19,850 and for the first time in its history below its previous all-time high.
On lower timeframes, data from Material Indicators (MI) records over $15 million in buying orders for BTC at $20,000. In the opposite direction, there are around $9 million in asks orders at around $20,900 which could operate as resistance in the short-term.
Will Bitcoin Bounce With The Stock Market?
The benchmark cryptocurrency has been moving in tandem with traditional equities, mainly the Nasdaq 100 Index and the S&P 500. According to Jurrien Timmer, Director of Macro for investment firm Fidelity, the S&P 500 has reached oversold levels. He said:
The weekly stochastics for the SPX: It’s at oversold readings consistent with major bottoms. I don’t believe we’re there yet but we could be getting close. We’re only 1 P/E point away from fair value.
Related Reading | TA: Bitcoin Remains In Downtrend, Risk of Drop Below $20K
If equities find a bottom soon, as Timmer claims, Bitcoin and the crypto market could bounce and prevent Bennett’s scenario. The drawdown in traditional finances has created a capitulation event, as seen below, which could play in favor of digital assets.
A quick take on technicals: signs of capitulation are starting to show. We can see it here…1/ pic.twitter.com/1SSYFCj8ir
— Jurrien Timmer (@TimmerFidelity) June 17, 2022