Cryptocurrencies plummet on extended China lockdowns

A risk-aversion sentiment prevailed on Monday, driving cryptocurrency prices down. Tighter Covid restrictions and protests in China fuelled global recession fears, driving risk sentiment down.

Bitcoin price dropped to near $16,000 on Monday as risk sentiment soured. If BTC declines, support can be found near $15,500, while resistance may be encountered at $18,150 and higher up at the psychological level of $20,000. 

Ethereum price dropped to $1,060 on Monday. 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 $1,350.

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.

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.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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