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Ethereum and Bitcoin are moving to local highs: what to expect from the crypto market in August?

Relevance up to 03:00 2022-07-29 UTC–4

The upward pace of Ethereum is gaining momentum, thanks to which altcoin quotes have broken through the important level of $1600. The main stage of growth occurred yesterday when the coin rose in price by 12.5%. At the same time, trading volumes continue to recover and, as of July 28, amount to $25 billion. The main catalyst for the growth of ETH quotes was the long-awaited transition to the PoS algorithm. Institutional and retail investors are actively investing in the main altcoin amid the migration of the main network.

Ethereum formed a bullish engulfing pattern and broke through the $1600 level, a key resistance zone in this price movement area. Despite a confident bullish voyage, ETH/USD quotes continue to fight for a round mark. Technical indicators indicate a local pause after a powerful upward spurt. The relative strength index has started moving sideways, and the stochastic oscillator is in danger of forming a bearish crossover, which will mean a local correction. At the same time, the MACD continues its upward movement above the zero mark, which indicates the strength of the long-term upward trend.

Ethereum reached an important indicator, but in order to continue its upward movement, the altcoin needs the support of Bitcoin, which also resumed its upward move but did not reach the desired level of $24.4k. A bullish breakdown of this mark will allow Ethereum and the cryptocurrency market to realize the next stage of the upward movement. The level of Bitcoin dominance in the market remains high, around 42.5%. That is why the main stage of the growth of the cryptocurrency market fell on the results of the Fed meeting and the positive reaction of Bitcoin to it.

Market expectations of a 75 basis point hike in the interest rate were justified, thanks to which Bitcoin rose by 8.5%. Following BTC, the market capitalization grew by 8% and again exceeded $1 trillion. Therefore, in the current situation, the growth of the market and Ethereum depends on Bitcoin. However, the main cryptocurrency is also in a difficult situation, as its growth is limited by the correlation with stock indices. The level of co-dependency between BTC and NASDAQ hit a two-month high ahead of the Fed meeting.

Therefore, the bullish potential of Bitcoin also depends on the movement of stock indices. The results of the Fed meeting favorably reflected on all indicators, thanks to which BTC and the crypto market realized their bullish potential. The S&P 500 index, with which Bitcoin has a close correlation, also made a powerful upward spurt. The indicator has broken through the difficult psychological level of $4k and is trying to gain a foothold above it. Technical indicators point to continued bullish momentum in the SPX. Stochastic and RSI continue to rise in the bullish zone, while MACD is above zero and moving in the green zone.

A similar situation is observed in the NDX index. The indicator formed a “bullish engulfing” and reached the difficult $12.6k resistance zone. The technical indicators of the NDX are similar to the SPX. Therefore we should expect an attempt at a bullish breakdown of this peak and the continuation of the upward movement of the stock index.

If Bitcoin correlates with stock indices, then it is inversely correlated with the US dollar index. When DXY goes up, BTC and stocks go down. Despite the increase in the key rate, the US dollar index continues to fall, which has a positive effect on high-risk assets. Technical indicators point to the continuation of the downward movement of the index. The RSI drops towards 40 and the stochastic is out of the bullish zone, indicating overbought. Despite the bearish signals, the DXY index is gradually completing the correction phase, after which the upward movement of the index will resume.

With this in mind, it is not worth expecting a full-fledged upward movement of the cryptocurrency and Bitcoin market. The crypto market is dependent on BTC, which largely follows stock indices. SPX and others fall when the dollar index starts to rise. At the same time, more and more signals are fundamentally appearing on the crypto market, indicating the gradual emergence of a powerful upward movement.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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