Crypto markets plummet on risk aversion sentiment

Bitcoin price dipped below the key $65,000 level on Wednesday. If BTC price declines, support can be found at $63,500, while resistance may be encountered at $70,000. 

Ethereum price also fell on Wednesday, dropping below $3,250. If Ethereum's price declines, it may encounter support near $3,080, while if it increases, resistance may be encountered near $3,400.

Fluctuating risk sentiment is causing volatility in crypto markets. Crypto markets have been under pressure by the war in Gaza. Fears that the war will spread in the Middle East are promoting a risk aversion sentiment putting pressure on risk assets such as cryptocurrencies. A rocket strike by Hezbollah in the Israeli-occupied Golan Heights over the weekend raised concerns of an all-out war in the region, putting pressure on cryptocurrencies. Crypto markets plummeted on Wednesday on reports that Hamas leader Ismail Haniyeh was killed by an Israeli missile strike in Iran. The death of the Hamas leader is likely to lead to retaliatory attacks against Israel and aggravate the situation in the Middle East further.

Cryptocurrency prices are affected by central banks’ interest rates. High interest rates are restricting economic growth putting pressure on risk assets, while the promise of rate cuts boosts crypto markets. Federal Reserve kept interest rates steady within a target range of 5.25% to 5.50% at its policy meeting on Wednesday but signaled a rate cut in September.

Fed Chair Jerome Powell’s press conference after the meeting had dovish undertones, propping up cryptocurrencies. Powell stated that the central bank aimed to keep interest rates steady in July and to discuss the possibility of a rate cut at a future meeting. Currently, a 25-basis points rate cut in September is fully priced in. Moreover, after Powell’s speech, market odds of a second rate cut within the year have gone up, providing support for risk assets. 

Former US President Donald Trump spoke in favor of Bitcoin at a conference in Nashville on Saturday, vowing to create a government stockpile if he wins the US presidential election. Trump’s support boosted Bitcoin price on Monday, but the cryptocurrency deflated sharply after touching the $70,000 level as many traders realized their gains. 

The US Securities and Exchange Commission (SEC) recently approved Ethereum spot exchange-traded funds (ETFs), propping up the cryptocurrency. The rally of Ethereum was short-lived, however. After an impressive opening on the first day, the performance of ETH spot ETFs has been underwhelming.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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