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Bitcoin (BTC) and other financial markets experienced a new wave of decline amid reports from the US Federal Reserve System about tightening monetary policy at the end of 2022. Comments by Fed members, namely James Bullard, president of the Federal Reserve Bank of St. Louis, and Fed Chairman Jerome Powell, led to a strengthening of the dollar and a sell-off in the financial and cryptocurrency markets. The ongoing dollar rally may unleash the “reflationary trading” that dominated the financial markets in the post-pandemic period, creating a significant threat to the bullish trend in the crypto market.

Bitcoin

Bitcoin showed a promising start to last week, showing positive dynamics: on Tuesday, the exchange rate rose above $ 40,000 and reached a new three-week high of $ 41,330. However, the first cryptocurrency could not stay above $ 40,000 and fell after the Fed’s comments to the level of $ 33,400.

Investors are closely monitoring macroeconomic events in anticipation of triggers for the future trajectory of bitcoin. After the crisis caused by the pandemic, the weakness of the US dollar has become an important factor in the growth of BTC. However, the recent jump in the value of the dollar has pushed crypto assets down. Further strengthening of the dollar will lead to a new fall in digital assets, including bitcoin.

Despite the wave of sales, the BTC dominance index has stabilized at 45%. This index, which measures the market value of bitcoin in relation to the entire cryptocurrency market, has been in a steady downward trend since the beginning of 2021 and only in the last few weeks has shown the long-awaited signs of a reversal. Investors will closely monitor the index – if it continues to grow, it may signal a difficult period for altcoins.

As BTC continues to decline, traders are increasingly concerned about the impending “death cross”. The “death cross” means that the 50-day moving average goes below the 200-day moving average, which usually indicates a serious sell-off is coming.

The figure of the death cross has repeatedly proved its accuracy both in the stock and cryptocurrency markets: it predicted four significant cryptocurrency collapses, as well as the stock market crash of 1974 and 2008. At the end of the bull market, the short-term momentum (represented by the 50-day moving average) will slow down, indicating the exhaustion of the buying momentum.

But, despite the negative consequences, the death cross is not always a harbinger of trouble, as it allows long-term investors to buy bitcoins at low prices and build up positions for the next bull run.

Ethereum

Ethereum (ETH) continues to give way to bitcoin for the second week in a row, as weakness persists in the altcoin sector. In 10 days, ETH lost more than 10% and was trading at $2,211 on Monday morning.

Significant losses over the past week have been incurred by many leading cryptocurrencies, including Ethereum, XRP and DOGE. From March 28 to May 15, the ETH/BTC chart, which has historically been a reliable indicator of the altcoin economy, experienced incredible bullish growth. However, there has been a reversal trend in the last two weeks. The ETH/BTC chart recorded incessant weekly losses, decreasing by 4% compared to the previous week. The continued weakening of the ETH/BTC price is a signal of a short-term bearish period for other altcoins.

On Sunday, ETH fell from the critical support level of $2,200 and is now preparing to retest the support levels of $2,000 and the 200-day EMA. The community is closely monitoring these support levels, which can provide trading opportunities both in the long and in the short side.