The overall altcoin market capitalization (all cryptocurrencies excluding Bitcoin) has been volatile for the better part of the past few weeks. The secondary crypto market, often criticized for its volatility, lived up to its reputation by posting a 20% decline within the first five days of this month before recovering strongly in the last 72 hours. However, it successfully defended the $850 billion valuation before recovering above $950 billion yesterday.
This roller coaster ride in the secondary market has been a key factor in the crypto market’s recent descent into Fear, Uncertainty, and Doubt (FUD). The bullish enthusiasm generated by spot Bitcoin Exchange Traded Funds (ETFs) approval in January has largely dissipated. Bitcoin, the largest cryptocurrency by market capitalization, was expected to hold above $60,000 for the foreseeable future before an eventual recovery in the third and fourth quarters of this year. As the altcoin market typically follows the gains of the leading digital currency, it was also expected to remain sluggish.
Altcoins Respond to Selling Pressure
However, the German government’s surprise sale of BTC and the Mt. Gox compensation payout upended the market at the end of the second quarter. Entering July cautiously, the digital currency space witnessed a dramatic sell-off, with BTC plummeting below $54,000 within a week. The secondary market fared even worse, dragged down by the slide in Bitcoin. Fortunately, both markets managed to stabilize and partially recover by the end of the second week.
Here is a graph of the altcoin market since the start of the month:
However, if we zoom out to understand the situation better, here is its graph since mid-2021:
According to popular crypto analyst Michael Van de Poppe, the altcoin market has set a long-term bottom at around $500 billion and is unlikely to test this level soon. However, the local bottom is at around $850 billion, and the bulls will likely mount their defense soon if ensuing bearish predictions are to be believed.
Further Price Corrections
At its current price of $59,900, a further drop for Bitcoin to $50,000 would also likely trigger significant losses in altcoins. In this scenario, the secondary market is expected to hold a $700 billion valuation, which could translate to up to 30% of altcoin losses. However, if the market can withstand major selling pressure, it might stabilize above $850 billion. The next resistance level sits at $1.23 trillion, reached in early April. A surge beyond this point could usher in a new altcoin season and potentially new all-time highs.
