What factors are driving the downtrend in altcoins and when can we expect a turnaround?

Over the past month, the crypto market, especially altcoinsfaced a prolonged downturn, with many considerable losses.

Ethereum (ETH), the second largest crypto by market capitalizationhas lost almost 10% of its value over the past 30 days, trading at around $2,960 as of May 13.

However, the ordinals (COMPUTER) was hit the hardest, falling 40% and now trading at just $36.80.

This market slowdown aligns with global economic trends, such as recent decision by 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 combating inflation and economic growth, may have created uncertainty among crypto investors, leading them to favor more established assets like Bitcoin (BTC).

BTC has largely traded above $60,000 levels during this downturn, with BTC dominance even reaching a peak of almost 57% in April, a significant increase from last year’s levels of 45-46%. As of May 13, BTC dominance stood at over 55%.

BTC Dominance Chart | Source: TradingView

Furthermore, the Fed’s announcement concerning its strategy of reducing bond holdings, which slows the pace of the flow of maturing bond products without reinvestment, could indicate possible economic challenges ahead.

This signal may have further reduced investor confidence in altcoins, diverting attention and capital away from riskier assets.

As the cryptocurrency market faces this downturn, the question arises: when will altcoins rebound? Let’s explore.

What do the experts think?

Analysts have offered various perspectives on the current state of the altcoin market. Here’s what they think

Patrick H. | CryptelligenceX

Patric H. remains optimistic on the overall market, anticipating a continuation of the bull market until mid-Q3/Q4 2024.

🚨Contrarian opinion: The substance is not in it.

May is going to be emotionally difficult for many #Bitcoin And #Altcoins investors.

Over the next 2-6 weeks we will see the final shake-up before the breakout.

🧵Here’s what to expect in this turbulent phase.

—Patric H. | CryptelligenceX (@CryptelligenceX) April 30, 2024

However, he warns of a phase of turbulence in the short term, particularly in May. He predicts a final shake-up in the next 2-6 weeks, which could return to $52,000 for Bitcoin and $2 trillion for the total market cap.

He attributes the delay in hitting the bottom to the 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 to watch for sentiment divergences and trading volumes, which could suggest a potential reversal.

Benjamin Cowen

Benjamin Cowen draws a parallel with the previous cycle, noting that ALT/BTC pairs tend to capitulate just before rate cuts. It suggests that ALT/BTC pairs could fall another 40% from current levels over the coming months.

In the last cycle, we saw #ALT /#BTC pairs capitulate just before rate cuts.

Maybe this time is no different? This would mean that ALT/BTC pairs would fall another 40% over the next few months.

Short-term counter-trends do not invalidate this view. pic.twitter.com/BK3VIrCBJ2

–Benjamin Cowen (@intocryptovere) April 30, 2024

Cowen attributes altcoins’ current struggles to a decline in social interest, comparing the current market movement to that of 2019.

Altcoins continue to struggle as social risk is in free fall. People just don’t seem to care.

This whole move still feels close to 2019 to me. Social interest also fell just before the rate cuts arrived, and then ALT/BTC pairs finally bottomed as the Fed pivoted. pic.twitter.com/SEKbLRMTaX

–Benjamin Cowen (@intocryptovere) April 29, 2024

He points out that social interest has declined before rate cuts in the past, hinting at a potential bottom for ALT/BTC pairs coinciding with a turning point in Fed policy.

Michael van de Poppe

Michaël van de Poppe notes that altcoins are experiencing a steady correction in USD valuations, but BTC valuations are falling sharply, approaching cycle lows.

THE #Altcoin market capitalization is experiencing a regular correction (in USD valuations).

BTC valuations are falling sharply and are at the bottom of the cycle.

Undervaluation versus reality.

Now is not the time to turn away from cryptocurrencies, but to attack the markets by taking higher risks. pic.twitter.com/h298e63ory

– Michaël van de Poppe (@CryptoMichNL) May 12, 2024

He suggests that this undervaluation presents an opportunity to attack markets with higher risk rather than shy away from crypto.

What should we learn from it?

These analyzes suggest a cautious outlook for the altcoin market in the near term, indicating that more corrections may be ahead.

However, they also point to a possible upward trend in the medium and long term. This means you must remain vigilant and flexible as the market changes.

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 crypto market is at a critical juncture, with potential catalysts that could restore normalcy and reignite bullish sentiment.

A major development is the progress of the Financial Innovation and Technology for the 21st Century Act (FIT21) of the United States House of Representatives, which goals bring regulatory clarity to digital assets.

If passed (could be in May itself), the bill could establish federal standards for digital assets, clarify the jurisdiction of regulatory bodies like the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), and establish a regulatory framework. for digital asset markets.

The crypto industry has long sought clearer regulation, and the FIT21 Act could provide much-needed certainty to market participants and investors, potentially boosting confidence and investment in the sector.

Additionally, the bill’s provisions allowing secondary market trading of digital products and imposing requirements on registered entities could improve market transparency and integrity.

Another potential market driver is the SEC’s upcoming decision regarding VanEck’s ETH spot exchange-traded fund (ETF). applicationscheduled for May 23, 2024. A favorable decision could trigger an ETH price rally, similar to the ETF-driven Bitcoin rally earlier in 2024.

Concerns remain regarding the SEC’s classification of ETH as a commodity or security, which could impact the approval of spot ETH ETFs.

Current sentiment around the launch of spot ETH ETFs in the United States is largely pessimistic, with concerns surrounding regulatory uncertainty and the position of the SEC under Chairman Gary Gensler.

Nonetheless, industry experts believe that a spot ETH ETF will eventually get the green light, like the spot BTC ETFs, which were initially rejected before prevailing in a lawsuit against the SEC.

In the short term, a rejection of the ETH spot ETF could trigger increased price volatility and a decline in ETH prices as the market absorbs the news.

Meanwhile, regulatory clarity and approval of spot ETH ETFs could propel the altcoin market recovery and uptrends in the coming months.

ETH Price Analysis

As of May 13, Ethereum was trading at around $2,970. ETH has been on a downward trend, raising concerns that it could fall below the $2,500 mark.

The recent ETH price trend has been bearish, with weekly trading opens lower than the previous week’s close, suggesting a lack of bullish momentum.

ETH Price Analysis | Source: TradingView

Over the previous 24 hours, ETH/USD traded positively, surpassing the $2,900 levels but facing solid resistance around the EMA50 at $2,990. For a downtrend to resume, ETH must break below $2,900, potentially heading towards the $2,800 and $2,620 levels.

On the other hand, further upside and a breakout of $2,990 could lead to further gains up to $3,130.

The expected trading range for ETH is between $2,800 (support) and $3,050 (resistance), with the trend remaining bearish.

Analysis of ETH suggests that prices could face continued downward pressure, which would also impact other altcoins in the market.

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