Cryptocurrencies lose bullish momentum

Cryptocurrencies edged lower on Wednesday, losing their bullish momentum and paring some of last week’s gains. Risk sentiment remains uncertain, and a trend has yet to form in crypto markets. Global recession concerns keep risk sentiment down, although cooling inflation has brought optimism for economic recovery. 

Global cryptocurrency market capitalization has started to recover this month and remains above $1 trillion. Crypto bulls are hoping that the recent cryptocurrency selloff has passed and that market confidence in the industry will be restored. Bears are fighting back, however, pushing cryptocurrency prices down.

US PPI data last week fell below expectations, reducing Fed rate hike expectations. PPI declined by 0.5% in December, versus estimates of a 0.1% drop. Headline inflation also dropped to 6.5% year-on-year in December from 7.1% in November. US inflation seems to be cooling, which may give the Federal Reserve some leeway toward scaling back its interest rate increases.

Even though inflation rates remain high, cooling price pressures have reduced rate hike expectations, providing support for riskier assets. The Fed and other central banks are starting to scale back their aggressive rate hiking, raising hopes of a reversal in cryptocurrencies’ downfall. Crypto markets exhibit low volatility, as market participants await the Fed monetary policy meeting next week.

Bitcoin price dropped below the $22,500 level on Wednesday. If the BTC price declines, support can be found near $17,930, while resistance may be encountered near $23,300. 

Ethereum price also edged lower on Wednesday, dropping to the $1,540 level. If Ethereum's price declines, it may encounter support near $1,370, while if it increases, resistance may be encountered near $1,670.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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