Major cryptocurrencies bounced off of 2-year lows on Tuesday, indicating that their collapse might have been arrested for the time being. The low cryptocurrency prices have attracted buyers, with Bitcoin and Ethereum showing some signs of recovering.
Increased risk aversion sentiment has hit crypto markets hard after the recent collapse of FTX. The FTX token faced liquidity issues, triggering a generalized crypto market sell-off. FTX CEO Sam Bankman-Fried has resigned and the company declared bankruptcy. These developments have undermined confidence in the crypto industry, giving rise to concerns of a cascading crypto crisis. Though many cryptocurrency-related institutions are still at risk from the fallout, such as Crypto Bank Silvergate, which has seen its stock price plummeting this month.
Bitcoin price plummeted to a 2-year-low of $15,500 on Tuesday, then started to recover, rising to $16,200. If BTC declines, support can be found at $15,000, while resistance may be encountered at $18,150 and higher up at the psychological level of $20,000.
Ethereum price also bounced off of a 2-year low on Tuesday, dropping to $1,070 in early trading but climbing back to $1,130 later in the day. If Ethereum's price declines, it may encounter support further down at the psychological level of $1,000, while if it increases, resistance may be encountered near the psychological level of $1,500 and further up at $1,660.
Uncertainty over the US mid-term elections added further pressure on crypto markets in the past couple of weeks. The results of the elections were close, with the votes being tallied for a week. Republicans eventually wrested control of the House from the Democrats, winning the elections with a narrow majority and bringing a measure of political stability to markets.
Risk sentiment was somewhat boosted by cooling US inflation last week. Reduced inflation is diminishing recession concerns, propping up risk assets. Market expectations of future rate hikes were considerably trimmed after recent US inflation data showed that inflation is cooling at a faster rate than expected. Reduced rate hike expectations diminish global recession concerns, boosting risk sentiment. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. 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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