Bitcoin drops from all-time high

Bitcoin price surged earlier this week, registering new all-time highs every day. Bitcoin price rose above the key $90,000 level on Wednesday for the first time in history, touching $93,300. Bitcoin’s rally was halted on Thursday, dropping below $88,000. If the BTC price declines, support can be found at $75,400, while resistance may be encountered at the psychological level of $95,000. 

Ethereum price deflated on Thursday, dropping from $3,200 to $3,08. If Ethereum's price declines, it may encounter support near $2,770, while if it increases, resistance may be encountered near $3,430.

Crypto markets surged after the announcement of Donald Trump’s victory in the US Presidential elections and continued to gain strength this week. 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 on Thursday, allowing Trump’s administration to pass laws more easily. After winning the US Presidency last week and the majority in the US Senate earlier this week, Republicans won control over the House of Representatives on Thursday. 

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.

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. The US Federal Reserve cut interest rates by 25 basis points on Thursday, to a target range of 4.50% to 4.75%. The Fed had already launched its easing cycle in September, with an aggressive 50-bp rate cut, signaling the end of its restrictive monetary policy. 

Odds of another rate cut in December shot up to 90% after the release of the US inflation report on Wednesday but dropped back to 75% on Thursday. Fed Chair Jerome Powell has stated that the progress of disinflation is steady, and the labor market is strong, permitting a shift towards a more neutral monetary policy. 

Concerns of a broadening conflict in the Middle East are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. The conflict between Israel and Hamas continues to escalate, putting pressure on risk assets such as cryptocurrencies. The conflict in the Middle East, however, has been raging for over a year and markets are starting to ignore this risk. In addition, reports that Trump has urged Russian President Vladimir Putin to de-escalate tensions in Ukraine have promoted a risk-on sentiment this week. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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