what lies ahead for Ethereum and other cryptocurrencies?

What factors are driving the downtrend of altcoins and when can we expect a trend reversal?

In the last month, the cryptocurrency market, in particular altcoinsfaced a prolonged recession, with many notable losses.

Ethereum (ET), the second largest cryptocurrency in market capitalizationit has lost nearly 10% of its value over the past 30 days, trading at around $2,960 as of May 13.

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

This market downturn is in line with global economic trends, such as recent decision by the Federal Reserve (Fed) to keep interest rates between 5.25% and 5.50%.

The Fed’s cautious approach to monetary policy to address inflation and economic growth may have created uncertainty among cryptocurrency investors, leading them to favor more established assets like Bitcoin (Bitcoin).

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

BTC Dominance Chart | Source: TradingView

Additionally, the Fed’s announcement with regard to Its strategy of reducing bond holdings, slowing the pace at which it allows proceeds from maturing bonds to flow out without reinvestment, could point to potential 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 crisis, the question arises: when will altcoins recover? Let’s explore.

What do the experts think?

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

Patric H. | CryptotelligenceX

Patric H. remains bullish on the overall market, predicting a continuation of the bull market through mid-Q3/Q4 2024.

However, it warns of a short-term turbulent phase, especially in May. He predicts a final shakeout in the next 2-6 weeks, possibly revisiting $52,000 for Bitcoin and $2 trillion for total market cap.

He attributes the delay in reaching the bottom to the lack of sufficient pain in the market, indicating that sentiment remains too euphoric.

Patric recommends monitoring the Fear and Greed Index for signs of a shift towards “fear.” He also said he is keeping an eye on the divergence in sentiment and trading volumes, which could hint at a potential trend reversal.

Benjamin Cowen

Benjamin Cowen draws parallels to the previous cycle, pointing out that ALT/BTC pairs tend to capitulate just before rate cuts. According to him, ALT/BTC pairs could drop another 40% from current levels in the coming months.

Cowen attributes altcoins’ continued struggles to declining social interest, comparing the current market movement to that of 2019.

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

Michael van de Poppe

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

He suggests that this undervaluation presents an opportunity to attack higher-risk markets rather than moving away from cryptocurrencies.

What to get from it?

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

However, they also indicate a possible bullish trend in the medium to long term. This means you should remain alert and flexible as the market evolves.

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 key impacts.

Potential catalysts for market recovery

The cryptocurrency market is at a critical juncture, with potential catalysts that could restore normalcy and revive bullish sentiment.

An important development is the progress of the Financial Innovation and Technology for the 21st Century (FIT21) Act of the U.S. House, 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 such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), and establish a regulatory framework for digital asset markets.

The cryptocurrency industry has long sought regulatory clarity, and the FIT21 Act could provide much-needed certainty to market participants and investors, potentially increasing confidence and investment in the sector.

Additionally, the bill’s provisions to allow secondary market trading of digital commodities and impose requirements on registered entities could improve market transparency and integrity.

Another potential market driver is the SEC’s impending decision on 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-led Bitcoin surge in early 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 surrounding the launch of spot ETH ETFs in the US is largely pessimistic, with concerns over regulatory uncertainty and the SEC’s stance under Chairman Gary Gensler.

Nonetheless, industry experts believe an ETH spot ETF will eventually get the green light, mirroring the path of BTC spot ETFs, which initially faced rejections before prevailing in an SEC lawsuit.

In the short term, a rejection of the spot ETH ETF could trigger greater 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 altcoin market recovery and bullish trends in the coming months.

ETH price analysis

As of May 13, Ethereum was trading at around $2,970. ETH has followed a downward trend, raising fears that it could fall below the $2,500 threshold.

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

ETH Price Analysis | Source: TradingView

Over the previous 24 hours, the ETH/USD pair traded positively, breaking above $2900 levels, but facing solid resistance around the EMA50 at $2990. For a downtrend to resume, ETH needs to break below $2900, potentially heading towards the $2800 and $2620 levels.

On the other hand, a continuation of the rally and a move above $2,990 could lead to further gains up to $3,130 levels.

The expected trading range for ETH is between $2800 (support) and $3050 (resistance), with the trend forecast remaining bearish.

Analysis of ETH suggests that prices may face continued downward pressure, impacting other altcoins in the market as well.

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