Crypto is ready for Global Reversal
The crypto market had a rough start of the year, declining by over 60% due to the hawkish Federal reserve statements, lockdowns in China, and TerraUSD collapse. As a result, the crypto market's capitalization fell to $1.26 trillion, the lowest since July 2021.
Altcoins are falling increasingly faster than the first cryptocurrency, causing an increase in the share of BTC, which is already 46.5% against 41.6% lows in mid-April. Bitcoin's 47%-48% share range looks like a turning point that might trigger the crypto market growth.
Pullback is coming
It is well-known the crypto market has a strong positive correlation with the US stock market. This fact should increase optimism among crypto investors as the week ending Friday, May 27, 2022, is now the best out of ten last weeks for the S&P 500.
At the same time, the US dollar index bounced off the historical resistance level of 104, and it looks like the USD might keep weakening as markets have already priced all negative news in.
Reasons for the reversal
The first reason is macroeconomic news from the USA. In April, the Bureau of Labor Statistics published the numbers of the Consumer Price Index m/m, which were at a 0.3% level compared to 1.2% a month earlier. After the Federal Reserve increased the key rate by 0.75%, the inflation growth slowed down significantly. It signals the correctness of FOMC monetary policy, and the market feels it. If the economic data continues to please investors with its stability, the US stock market will have all chances for significant recovery, and an upcoming Amazon split only confirms it.
Moreover, earlier, the hawkish Fed monetary policy raised investors' concerns. However, minutes released on Wednesday, May 25, indicated that most officials were strongly committed to rate hikes by 50 basis points at each of the next two meetings in June and July. This information matched investors' expectations, as the Fed sent a message that it was serious about inflation without sending growth into a tailspin.
Monday's run, May 30, comes on the back of a bump in Asian equities amid reports that major Chinese cities started to ease coronavirus restrictions after months of strict lockdowns. Traders laid bets that reopening the economy could increase consumer spending, increasing company revenues in the coming weeks and indicating a bottom for stocks in the region. China is the second-largest economy globally, so its economic situation also affects the market's sentiment.
Technical analysis
BTCUSD, weekly chart
BTCUSD is consolidating above the 200-week moving average. We might see an increase up to the descending trendline in the short term, to approximately the $36 000 resistance level.
If the price breaks this descending trendline and closes the monthly candle above $36 000, we might see Bitcoin worth $60 000 by the end of 2022.
On the other hand, if the price rejects the trendline, BTCUSD might decline to the $19 000 historical support level.
ETHUSD, monthly chart
Ethereum usually follows Bitcoin. The price is moving in the falling wedge bullish pattern. If it breaks through the descending trendline and closes above the $2500, it will move to $3850. Otherwise, the second cryptocurrency will decline to $1350.
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