Cryptocurrency rally halted by bear markets

Cryptocurrencies struggled to rebound last week, with Bitcoin and Ethereum testing key psychological support levels. Bulls tried to push cryptocurrency prices higher but failed to overcome strong crypto market bearish tendencies, triggered by stock market uncertainty. Most major cryptocurrencies rallied early on Monday as the dollar weakened, but plummeted later in the day as the bears prevailed.

The risk-aversion sentiment was renewed last week, driving stock markets and high-risk assets down, with retail stocks from Target and Walmart declining heavily this week. Technology stocks, such as Amazon, Tesla, and Apple also weakened, dragging cryptocurrencies down. Most major cryptocurrencies were affected by stock market volatility, as crypto markets have been following the overall trends of stock markets and especially of tech stocks. 

A strong risk-off sentiment has prevailed over the past few months, driving investors to safer assets and dampening the appeal of cryptocurrencies. In the past six months, the cryptocurrency market has lost almost $2 trillion. 

Bitcoin seemed to rally early on Monday, climbing above the $30,000 level support, but plummeted later in the day, falling to $29,000. If Bitcoin price declines, support may be found near $26,700 and further down at $19,400, while resistance may be found at $40,000 and further up near $48,200. 

Similarly, Ethereum recovered a little early on Monday, but fell heavily later in the day, dropping below its $2,000 level support. If the Ethereum price declines, further support may be found near $1,700, while resistance may be encountered near $3,174.

The Fed has raised its benchmark interest rate by 50 base points, its highest rate hike in 22 years and the BOE also increased its interest rate by 25 bp. On Monday, ECB President Lagarde posted an uncharacteristically hawkish statement, pointing to rate hikes in Q3 of this year, which would bring the ECB’s interest rate at least to zero and possibly to positive territory. 

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. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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