A strong risk-off sentiment has prevailed since last week, driving investors to safer assets and dampening the appeal of cryptocurrencies. A massive sell-off of tech stocks was triggered this week, sending cryptocurrencies into free fall. Global stock markets have been falling this week, led by tech stocks. Most major cryptocurrencies also plummeted this week, as crypto markets have been following the overall trends of stock markets and especially of tech stocks.
Stablecoin terraUSD collapsed this week, losing its dollar peg and trading as low as 30 cents, raising fears that other cryptocurrencies will follow in its wake. Luna has also crashed, losing 99% of its value. Stablecoin Tether also lost its $1 peg briefly on Thursday and, as it is the world’s biggest stablecoin if its price continues to fall it may lead to market contagion, exasperating cryptocurrency sell-off.
Bitcoin fell below the $30,000 level support on Thursday, touching a 16-month low near $26,000 before paring its losses and climbing back up to $29,000. If Bitcoin price declines further, support may be found near $19,400, while resistance may be found at $40,000 and further up near $48,200.
Ethereum also retreated on Thursday, trading below the $2,000 level support. If the Ethereum price continues to decline further support may be found near $1,700, while resistance may be encountered near $3,174.
On Wednesday, US CPI and Core CPI data exceeded expectations, showing that US inflation is not slowing down as much as forecasted. US consumer prices rose at an annual pace of 8.3% in March, boosting the dollar.
The dollar reached a 20-year high this week, buoyed by hawkish Fed policy and risk-off sentiment. The rising dollar diminishes the appeal of high-risk assets such as cryptocurrencies. Continued Russian hostilities against Ukraine are also increasing risk-aversion sentiment, putting pressure on crypto markets.
Last week, the Fed raised its benchmark interest rate by 50 base points, its highest rate hike in 22 years and the BOE also increased its interest rate by 25 bp. The shift of major central banks towards a more hawkish fiscal policy has been putting pressure on cryptocurrencies over the past few months. Most major Central Banks are turning towards a tighter policy and a return to pre-pandemic interest rates, driving cryptocurrency prices down.
BTC/USD 1h Chart
ETH/USD 1h Chart
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