Cryptocurrencies follow stock market volatility

Global stock markets exhibited high volatility on Tuesday, plummeting early in the day, but paring their losses later on Tuesday. Major cryptocurrencies also fell heavily early on Tuesday but finished the day higher. Crypto markets have been known to follow the overall trends of stock markets and especially of tech stocks. 

A strong risk-off sentiment has prevailed over the past few months due to geopolitical tensions, driving investors to safer assets and dampening the appeal of cryptocurrencies. As however, the crisis drags on, and risk sentiment is slowly returning to markets. Market sentiment has been fragile during the past couple of weeks, causing volatility in stock markets and cryptocurrencies alike.

Bitcoin plummeted below the $30,000 key psychological support level early on Tuesday, but pared its losses later in the day, rising to $31,500. If Bitcoin price declines, support may be found further down near $26,700, while resistance may be found at $40,000 and further up near $48,200. 

Ethereum price also crushed on Tuesday, falling to $1,700 but rallied later, climbing to $1,870. If the Ethereum price declines, support may be found near $1,720, while resistance may be encountered near $2.960 and higher up at $3,174.

The shift of major central banks towards a more hawkish fiscal policy has been putting pressure on cryptocurrencies over the past few months. Most major Central Banks are turning towards a tighter policy and a return to pre-pandemic interest rates, driving cryptocurrency prices down. 

The Fed has raised its benchmark interest rate by 50 base points and the BOE also increased its interest rate by 25 bp. The ECB has also indicated that it will move towards a more hawkish policy, increasing market expectations that it will raise its interest rates in July. This week, the ECB’s monetary policy meeting on June 9th is expected to affect crypto markets as well.

BTC/USD 1h Chart

ETH/USD 1h Chart

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: