Top Reasons Behind the Crash of Altcoins
The crypto market took a turn for the worse this week as Bitcoin (BTC) saw a significant drop to its lowest price in four weeks, plummeting over 2% to $65,100 during the U.S. trading session from its previous level of around $67,000. BTC has experienced a 7.5% decline over the past seven days, leading to a ripple effect on other cryptocurrencies, commonly referred to as altcoins.
Renowned crypto analyst Michaël van de Poppe, known as “Crypto Michaël,” has delved into the crash in altcoin prices and offered insights into the future of the cryptocurrency market. He highlighted that major altcoins have experienced a sharp decline of over 40% in the last two weeks, with on-chain altcoins witnessing an even more substantial drop of over 70%. He also pointed out the correlation between Bitcoin dominance and altcoins, suggesting that a shift in Bitcoin dominance could potentially trigger a new altcoin rally.
Many individuals within the crypto community are questioning the reasons behind the significant crash in altcoins. Here are some key explanations:
1. Uncertainty Surrounding Spot Ethereum ETFs: The uncertainty surrounding the approval and listing of spot Ethereum ETFs in the U.S. has been identified as a primary factor contributing to the current market crash. Despite being approved by the SEC, the delay in listing these ETFs has led to confusion and a negative impact on market sentiment. Michaël explained the approval process involving 19b-4 forms and S1 forms, highlighting the delay in listing as a key driver of the downward pressure on the market.
2. Macroeconomic Factors and Market Impact: Lower-than-expected U.S. inflation initially hinted at a pause in Fed rate hikes, but the Fed’s recent hawkish stance has created uncertainty. Altcoins typically perform well in low-interest rate environments with high liquidity, factors that are currently lacking. Additionally, a strong dollar, supported by recent ECB rate cuts, has further intensified pressure on the crypto market.
Despite the prevailing negative sentiment, there are indications of a potential market turnaround in the near future. Michaël remains optimistic about a reversal taking place within the next 1-2 weeks. He emphasizes the significance of Bitcoin’s dominance on altcoins, highlighting that the underperformance of altcoins is partly due to Bitcoin’s high dominance. A shift in Bitcoin dominance could serve as a catalyst for a new altcoin rally.
Key support levels for Ethereum against Bitcoin have been identified by Michaël, underscoring their importance in a potential reversal scenario. However, he acknowledges that macroeconomic indicators such as dollar strength and U.S. treasury bond yields play a crucial role in influencing market movements.
As we await further developments, only time will reveal whether the altcoin market will bounce back or if this crash signals a more profound shift in the market dynamics. Stay tuned for updates on this evolving situation!