What initially seemed like a promising week for crypto turned sour as Bitcoin (BTC) dropped to its lowest price in four weeks, falling over 2% to $65,100 during the U.S. trading session, down from around $67,000. Over the past seven days, BTC has seen a 7.5% decline. When Bitcoin prices drop, other cryptocurrencies, known as altcoins, often follow suit.
Analyzing the recent downturn, the crash in altcoin prices has provided insights into the cryptocurrency market’s future. Major altcoins have dropped by over 40% in the past two weeks, with on-chain altcoins plummeting by over 70%. The impact of Bitcoin dominance on altcoins suggests that a reversal in Bitcoin dominance could signal a new altcoin rally.
Many in the crypto sphere are questioning why altcoins are crashing so significantly. We have some answers for you.
Uncertainty Surrounding Spot Ethereum ETFs
One of the primary reasons for the current crash is the uncertainty surrounding spot Ethereum ETFs in the U.S. Although approved by the SEC, these ETFs are not yet listed, causing confusion and affecting market sentiment. The two-part approval process involves 19b-4 forms (covering technical details and SEC compliance) and S1 forms (related to listing on exchanges). The delay in listing has contributed to downward pressure on the market. Once spot Ethereum ETFs are listed, Ethereum could be classified as a commodity similar to Bitcoin. This classification could attract increased institutional investment and wider acceptance of Ethereum and other cryptocurrencies.
Macroeconomic Factors and Market Impact
Lower-than-expected U.S. inflation initially suggested a potential halt in Fed rate hikes, but the Fed’s hawkish stance maintains uncertainty. Altcoins thrive in low interest rate and high liquidity environments, both of which are currently lacking. A strong dollar, bolstered by recent ECB rate cuts, is also pressuring the crypto market.
Is a Reversal on the Cards?
Despite the current negative sentiment, there are signs of a potential rebound. I am optimistic about a market reversal in the next 1-2 weeks. Bitcoin’s dominance over altcoins is another reason why altcoins are underperforming. A reversal in Bitcoin dominance could signal a new altcoin rally.
Key Support Levels
The key support levels for Ethereum against Bitcoin suggest a potential reversal is expected. However, macroeconomic indicators like dollar strength and US treasury bond yields continue to affect market movements.
Only time will tell if the altcoin market rebounds or if this downturn signals a more significant shift. Stay tuned for further updates!