Bitcoin surges but fails to maintain bullish momentum

Crypto markets were volatile on Monday, with major cryptocurrency prices surging early in the day but dropping sharply later. In a surprisingly bullish move early on Monday, Bitcoin gained over 3% but failed to maintain a bullish momentum and relinquished gains by the end of the day.

Bitcoin price rose sharply on Monday, breaking through the $27,000 level barrier but tumbled later in the day, dropping to $26,500. If BTC price declines, support can be found near $24,900, while resistance may be encountered near $28,100. 

Ethereum also shot upwards in early trading on Monday, touching $1,670 but retreated to $1,630 later in the day. If Ethereum's price declines, it may encounter support near $1,600, while if it increases, resistance may be encountered near $1,700.

Reports of a $3 billion sell-off by the FTX drove cryptocurrency prices down early last week. The bankrupt FTX exchange is holding $3.4 billion in crypto assets waiting to be liquidated. The impending liquidation of FTX will involve selling the assets in batches of $100-$200 million per week. The company received approval from the Delaware Bankruptcy Court to liquidate its assets last week. After the initial panic faded, however, markets took the news in stride.

US inflation surprised on the upside last week, increasing rate hike expectations and putting pressure on crypto markets. Inflationary pressures are not easing just yet, despite the Fed’s high-interest rates. US headline inflation came in hotter than anticipated, climbing to 3.7% year-on-year in August from 3.2% in July versus 3.6% anticipated. Increasing price pressures may push the Fed to continue its hawkish policy until inflation drops closer to the Fed’s 2% target.

Several major central banks are holding their monetary policy meetings this week and this is expected to raise volatility in cryptocurrencies. The main event of the week is the Fed’s interest rate announcement on the 20th. Even though it is widely anticipated that the Fed will keep interest rates stable this month, a lot is riding on the central bank’s forward guidance. A hawkish message may see crypto markets dipping once more. 

Increases in central banks’ interest rates sour risk sentiment, driving risk assets down. Most investors are anticipating a pause in rate hikes, but the US central bank has signaled that further tightening is possible if inflation does not go down consistently. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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