Bitcoin rally halted on risk aversion sentiment

Bitcoin price surged last week, registering a new all-time high of $93,300. Bitcoin’s rally was halted, however, and the cryptocurrency traded sideways around the $90,800 level on Monday. If BTC price declines, support can be found at $86,000, while resistance may be encountered at $93,300. 

Ethereum price rose from $3,060 to $3,170 on Monday. If Ethereum's price declines, it may encounter support near $3,000, while if it increases, resistance may be encountered near $3,430.

Crypto markets gained strength after Donald Trump’s victory in the US Presidential elections. Trump’s proposed tariffs and tax policies will support economic growth, boosting high-risk assets, such as cryptocurrencies. Republicans secured full control of the US Government last week, allowing Trump’s administration to pass laws more easily. The Republicans have completed the government trifecta, by winning the US Presidency, the majority in the US Senate, and gaining control over the House of Representatives. 

In addition, Trump has openly declared his support of crypto markets, announcing that he will make the US ‘the crypto capital of the planet’. Growing expectations that the new government will adopt a pro-crypto regulatory and fiscal policy have been boosting crypto markets, especially since Donald Trump announced plans to accumulate a national Bitcoin stockpile.

Geopolitical concerns are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. Risk sentiment dropped on Monday, as tensions between Russia and Ukraine flared over the weekend. Russia launched a large airstrike against Ukraine’s energy infrastructure over the weekend. In addition, US President Joe Biden green-lighted Ukraine’s use of US-bought missiles against Russia. These long-range missiles can reach deep into Russian territory and Biden’s decision can cause the crisis in Ukraine to escalate further. Russia deployed North Korean troops into Ukraine, which fuelled Biden’s decision to permit Ukraine to use the missiles.

The conflict between Israel and Hamas is also putting pressure on risk assets. The conflict in the Middle East, however, has been raging for over a year and markets are starting to ignore this risk.

Cryptocurrency prices are also 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. Odds of another rate cut in December dropped to 60% this week from 90% the week before, putting pressure on crypto markets.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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