Cryptocurrencies plummet as risk sentiment sours

Global recession concerns reignited a risk aversion sentiment on Wednesday. Souring risk sentiment drove crypto markets and stock markets down. 

Bitcoin price plummeted on Wednesday, dropping to the $16,700 level. If the BTC price declines, support can be found near $16,000, while resistance may be encountered at $17,400. 

Ethereum price crushed on Wednesday, dropping to the $1,220 level. If Ethereum's price declines, it may encounter support at $1,149 and further down at the psychological level of $1,000, while if it increases, resistance may be encountered near $1,350.

The US central bank’s next monetary policy meeting is scheduled for next week on the 14th and traders are trying to gauge the Fed’s policy direction. Market expectations of future rate hikes were considerably trimmed after recent US inflation data showed that inflation is cooling at a faster rate than expected. Reduced rate hike expectations diminish global recession concerns, boosting risk sentiment. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Rate hikes are expected to taper off in 2023 as the central bank moves into a stable interest rate.

Risk sentiment received a boost last week, as China's concerns started to ease. Crypto markets and stock markets edged higher in hopes of China’s economic recovery. After days of protests against the crippling Covid lockdowns, Chinese authorities finally seem ready to relax some of the harsh Covid restrictions. The Chinese government eased some of its strident Covid regulations, abandoning its zero-Covid policy. 

Increased risk aversion sentiment, however, has hit crypto markets hard after the recent collapse of FTX. The FTX token faced liquidity issues, triggering a generalized crypto market sell-off and undermining confidence in the crypto industry.

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: