Major blue-chip altcoins are taking a fresh beating on Wednesday in wake of a hawkish policy announcement from the US Federal Reserve.
While the Fed refrained from lifting interest rates for an 11th consecutive time, instead leaving rates at 5.0-5.25%.
But the central bank added to the market’s woes via new guidance on the possible future path of interest rates.
The updated dot plot summarising Fed policymaker expectations as to where interest rates will be in the years ahead showed that interest rates are expected to rise to 5.6% by the end of the year.
That was a big jump from the last dot-plot, where the median expectation of Fed policymakers was for interest rates to end 2023 at 5.1%.
Crypto investors responded by dumping their altcoin holdings.
As per CoinMarketCap, over the last 24 hours, Ether (ETH) was last down over 5%, XRP (XRP) was down 8.6%, Cardano (ADA) was down around 5%, Solana (SOL) and Polygon (MATIC) were down just over 4% and Litecoin (LTC) was down around 6%.
Altcoin markets had already taken a beating last week due to new US Securities and Exchange Commission (SEC) lawsuits against Binance and Coinbase.
In these lawsuits, the SEC had singled out a number of altcoins (including BNB, ADA, SOL and MATIC) as being unregistered securities.
If courts side with the SEC, these tokens will face a much stricter regulatory regime in the US, which is seen as likely to significantly stifle their ecosystem development.
Are We in a New Altcoin Bear Market?
The latest drop in major blue-chip altcoins has some crypto investors asking whether we are in a new altcoin bear market.
For some coins that is almost certainly already the case.
Cardano (ADA) already hit fresh multi-year lows last week when it briefly dropped under $0.23.
ADA was last trading just above $0.26, down a staggering 45% from earlier yearly highs around $0.46.
The cryptocurrency is trading way below its major moving averages and its failure to recover back to the north of resistance in the form of the March lows around $0.30 suggests a drop towards $0.20 is on the cards.
Solana (SOL), meanwhile, remains substantially higher on the year, but is also well below all of its moving averages.
At current levels in the $14s, SOL is close to 50% down from earlier yearly highs.
Its recent failure to get back above resistance in at $16 has some technicians now betting that a retest of 2022 lows around $8 is possible.
We may also soon be able to declare that Ether (ETH) is in a bear market.
ETH fell to the mid-$1,600s on Wednesday, breaking below an uptrend that has been in play since last November in the process.
If it also breaks below its 200DMA at $1,630, technicians are likely to call for a drop back to resistance-turned-support in the mid-$1,300s.
Bitcoin Dominance to Extend?
While bitcoin also faces the same headwinds as altcoins relating to higher expected interest rates, it faces less regulatory uncertainty in the US.
That’s because bitcoin is the only cryptocurrency the current SEC leadership has said they do not view as a security.
While bitcoin’s price may continue to fall, its dominance in the crypto market is likely to continue rising.
As per TradingView, bitcoin’s dominance was last around 49% and could soon rise above 50% for the first time in more than two years.
Meanwhile, according to BlockchainCenter.net, crypto markets remain deeply in so-called “Bitcoin Season”, with the index currently at 16.
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