Cryptocurrencies propped up by increased risk appetite

Investors’ appetite for risk grew on Monday, as US inflation data later in the week are expected to show that inflationary pressures are finally easing. Risk on sentiment benefitted stock markets and crypto markets on Monday. Risk sentiment remains unstable, however, affecting stock markets and crypto markets alike. 

Global recession fears have been propping up safe-haven assets and pushing down cryptocurrency prices. Steep rate hikes put pressure on risk assets, as most major Central Banks shift towards a tighter fiscal policy. 

Fed rhetoric propelled the dollar to 20-year highs in the past couple of weeks amidst mounting expectations of a steep Fed rate hike in September. Markets are currently wavering between a 50-bp and a 75-bp Fed rate hike in September, driving the dollar down.

The dollars ascend has pushed competing assets down, putting pressure on cryptocurrency prices. As the dollar weakened, however, most major cryptocurrencies started to rally. Bitcoin price gained upward momentum, rising past the $22,000 level on Monday. Bitcoin’s rally represented its biggest price gain in six months, pushing crypto market capitalization back over $1 trillion. If BTC declines again, support can be found at the key $20,000 level, while resistance may be encountered near $23,000. 

Ethereum price edged lower on Monday, falling below the $1,700 level. If Ethereum's price declines, it may encounter support near $1,550 and further down at $1,420. If Ethereum's price increases, resistance may be encountered near $1,720.

Ethereum price has been boosted in anticipation of the so-called ‘merge’, which is expected later this week. The Merge from the Proof-of-Work to the Proof-of-Stake method will be a significant network upgrade that is expected to lead to an increase in demand for Ethereum. Ethereum price has been slipping ahead of the merge, however, as markets possibly face jitters over the success of the merge.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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