Cryptocurrencies plummeted on Tuesday as the FTX cryptocurrency collapsed. The FTX token faced liquidity issues, triggering a generalized crypto market sell-off. On Monday, Changpeng Zhao, the CEO of Binance, stated that the exchange will liquidate all the FTT holdings in its books. However, an agreement was reportedly reached later on Tuesday for Binance to acquire FTX and absorb its losses. This development will likely restore stability to crypto markets.
Cryptocurrencies were also weakened on Tuesday amid US election uncertainty. The US mid-term Congressional elections were taking place on Tuesday and their outcome may cause crypto market volatility. Concerns that the Democratic party might lose control of Congress in Tuesday’s elections, leading to political instability in the US are promoting a risk aversion sentiment.
Bitcoin price plummeted from $20,800 to $18,200 on Tuesday, testing the support at this level before paring some of its losses. If BTC declines, support can be found again at $18,200 and further down at $17,600, while resistance may be encountered near $21,000.
Ethereum price dropped sharply from $1,600 to $1,320 on Tuesday and is currently testing the support at this level. If Ethereum's price declines, it may encounter support further down at $1,190, while if it increases, resistance may be encountered near $1,660 and further up at $1,780.
Cryptocurrency prices are also pushed down by continuous rate hikes. As central banks raise their interest rates, moving towards an increasingly hawkish fiscal policy, recession fears grow, reducing risk appetite. The US Federal Reserve hiked its interest rate by 75 basis points at its monetary policy meeting last week. The Fed has so far increased interest rates by a total of 375 basis points this year, bringing its benchmark interest rate to 4.0%.
It is uncertain, however, whether the Fed can continue its aggressively hawkish policy. Market expectations are currently in favor of a 50-bps rate hike in December and a 25-bps hike in January. Rate hikes are expected to taper off in 2023 as the central bank moves into a stable interest rate.
BTC/USD 1h Chart
ETH/USD 1h Chart
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