The crypto market has extended its losses over the past week, as it continues to gain downside momentum. Main cryptocurrencies in the top 10 by market cap are trading in the red with very few preserving some of their gains from last week.
At the time of writing, the crypto total market cap stands at $1.09 trillion with a 2% loss in the 4-hour chart. The sector was rejected at the $1.2 trillion resistance and seems on track to slate more losses in the short term.
Crypto total market cap moving sideways on the 4-hour chart. Source: Tradingview
Analyst Justin Bennett believes the sector could trend lower if it breaks below support at $760 billion. As seen below, the crypto total market cap has been moving in a channel for over 4 years.
Every time the total market cap touches the top of this channel, cryptocurrencies trend lower. At the time of writing, the sector is a major crossroads and could attempt to re-test support at around $300 billion if downside pressure extends. The analyst said:
Is another 65% drop in the cards for crypto? Don’t rule it out. $760B will continue to be significant for TOTAL. But if that breaks, a retest of this multi-year channel at $370B seems likely.
Crypto total market cap approaches support level after crucial rejection at the top an important channel. Source: Justin Bennett via Twitter
There are several factors that could contribute to selling pressure across multiple timeframes. Today, the U.S. Federal Reserve (Fed) will speak about the current macro-economic outlook. Depending on the statements from the financial institution’s official, digital assets could experience some relief.
Last week, the U.S. published its Consumer Price Index (CPI) print for July, a metric used to measure inflation in the U.S. dollar. The metric has been trending down and could provide some room for the Fed to ease up on its monetary policy.
Today should provide more clues on the direction the financial took might adopt. At the same time, the crypto market could see an increase in volatility.
What Could Push Crypto Lower
In addition, Bennett noted that the S&P 500 Index is “mimicking” its 2008 crash. At that time, one of the worst crises in recent history pushed the legacy financial system to the brink of collapse.
Bennett believes equities might be moving similarly to 2008 which hints at further losses for risk-on assets, such as cryptocurrencies. As seen below, the S&P 500 might record some gains before moving into its 2008 lows.
S&P 500 following 2008 trajectory? Source: Justin Bennett via Twitter
In that sense, Bennett said that the bottom “is not if for stock or crypto” while he contemplates the possibility of a “devasting crash” in the nascent asset class. The analyst added:
And if that doesn’t seem possible, know that the S&P dropped 50% during the 2000 crash and 57% in 2008. The Fed was also in a MUCH better position to step in and save markets during both of those crashes.
Still, larger cryptocurrencies such as Bitcoin and Ethereum have been able to sustain key support levels despite macroeconomic conditions. The latter might pull back on its negative effects on digital assets if the Fed pivots its approach to combat inflation with a less aggressive strategy.