23.05.202210:09 Forex Analysis & Reviews: Crypto Market Enters New Bear Market Phase: What Does This Mean for Bitcoin and Altcoins?

Bitcoin ended the previous week on a bearish note and set a new record for the number of red candles in a row. After breaking such a record, there is no doubt that the cryptocurrency market and Bitcoin are moving towards the next phase of the bear market. It is likely that it will be the final, albeit the most painful. Despite this, even in such a situation, digital assets will show local growth.

For example, in the near future, Bitcoin will try to get to the $33k–$35k range. Judging by the weekly candles, the bearish phase reached a local top and was gradually exhausted. On top of that, eight consecutive weekly bearish candles is a new record that should be broken by active buying action as sellers run out of potential in the current price environment. Technical indicators indicate an increase in bullish sentiment. The stochastic oscillator and the RSI index resumed their upward movement, which suggests an increase in purchase volumes. The MACD has also made a sharp upward spurt and is approaching the zero mark. However, technically, local bursts of buyer activity can be called an upward correction during a bear market.

Another life hack for investors is the US dollar index. The current BTC/USD consolidation and the lull in the market are associated with a local DXY correction. The index fell to the support level at 100–102 and is trying to consolidate in this area. Technical indicators signal the weakness of the index and the continuation of the flat. For other assets, this is an opportunity to increase buying activity and try to reach strong support levels to create a more stable foothold for further declines. With this in mind, a correction or consolidation in the DXY will be a window of opportunity for high-risk assets over the next few months.

The rest of the situation remains negative and Bitcoin will continue its downward movement, despite some market confidence in the formation of a local bottom around $24k. According to the historical context, the price of Bitcoin loses about 80%–90% during bear markets. As of May 23, the fall of the cryptocurrency from the absolute maximum is only 63%. This suggests that BTC could drop another 20% to $24k. And here there are two options for the development of events.

On the one hand, the cryptocurrency was already very close to this mark on May 12, which can be perceived as a general correction of 80%. However, the price "pinned" this level, and did not bargain directly near it. With this in mind, it is likely that the BTC price will fully decline to these levels. This is also indicated by the nature of the current bear market, which is provoked by unprecedented inflation and the aggressive policy of the Fed. With the liquidity withdrawal process looming, Bitcoin will retest the $24k support area.

As for the altcoin market, the situation here depends entirely on the movement of the price of Bitcoin. The main worrying news for alternative coins is the significant increase in Bitcoin dominance. As of May 23, BTC Dominance Index has reached 45 percent. The last time the metric reached such a high level was in November 2021. For altcoins, this means a gradual reduction in liquidity and a fall to local lows. Given the fact that over the years the market has grown in breadth and many projects and new tokens have appeared, the "survival of the fittest" rule is more relevant than ever. It is likely that as the price of altcoins and the cryptocurrency market decline to a 90% correction, we will see a purge of projects with small amounts of liquidity.