Crypto markets weighed down by interest rate hikes, geopolitical tensions

Crypto markets have been following the overall trends of stock markets, experiencing heavy losses as the crisis in Ukraine has turned investors’ interest towards safer assets. This week, reports of renewed Russian attacks against Ukraine have dashed hopes for a diplomatic resolution to the conflict any time soon, putting pressure on risk assets. Diplomatic talks continue, although a de-escalation of the crisis still seems to be some way off, and tensions between Russia and Ukraine intensified. New western sanctions on Russia are also reducing demand for risk assets, with both the US and the EU announcing a new round of sanctions, targeting financial institutions, commodities and individuals. 

The US Treasury Secretary, Janet Yellen, addressed the issue of cryptocurrency regulation in a comprehensive speech on Thursday. Yellen stated that cryptos were a ‘transformative’ technology and highlighted both their benefits and risks, calling for crypto regulation to minimize fraud. 

Last week, Bitcoin prices climbed as high as $48,000 for the first time since the beginning of the year. This week, however, the BTC price retreated, trading around $43,500 on Thursday. If Bitcoin price declines further, it may find support at $37,500 and $36,000, while resistance may be found near $48,200 and further up at the psychological level of $50,000. 

Ethereum's price has been boosted over the past couple of weeks, as the release of a long-awaited software upgrade. Ethereum price also climbed last week, reaching above the $3,400 level resistance, to the $3,500 level. Eth price declined this week, trading around $3,200 on Thursday. If the Ethereum price falls, it may find support near $3,075. In case its price goes further up, it may find resistance near $3,800.

The shift of major central banks towards a more hawkish fiscal policy has also 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. Increasingly hawkish Fed rhetoric in the past couple of weeks is pointing to a steep rate hike of 50 base points at the Fed’s next policy meeting in May, putting pressure on cryptocurrencies. On the other hand, investors are starting to use cryptocurrencies as a hedge against inflation, which could provide a boost to crypto markets, as inflation is expected to peak in the following months.

In addition, most major cryptocurrencies have received a boost over the past month, as demand from Russian and Ukrainian markets increased. Bitcoin volume from Russian markets has increased considerably, as Russian investors aim to escape the plummeting Rouble and Russian sanctions. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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