Cryptocurrencies slip as risk sentiment drops

Cryptocurrency prices sank last week and dipped on Thursday on increased Fed rate hike expectations. Prolonged rate hikes increase global recession concerns and promote a risk-aversion sentiment. 

Market expectations of the Fed peak interest rate continue to rise on hotter-than-expected US price pressures, putting pressure on crypto markets. Fed Chair Powell testified before the Senate Banking Committee on Tuesday and his speech was more hawkish than anticipated. Powell warned that the US central bank is prepared to accelerate the pace of tightening if price pressures remain high. Powell’s second testimony on Wednesday was slightly less hawkish, emphasizing that, although inflation had been more resilient than anticipated, any decision to hike rates more aggressively would be data-based. 

The Fed might raise interest rates for longer than previously expected, putting pressure on crypto markets. After Powell's testimonies, markets adjusted Fed rate hike expectations from a 25-bp raise to a 50-bp increase in March. Current market odds lean towards further tightening in the upcoming Fed meetings and an increase in interest rates in a range of 5.5%-5.75%. 

Uncertainty over the future of Silvergate also put pressure on crypto markets, driving many major cryptocurrency prices down. Global crypto market capitalization has fallen in the past few days to just above the $1 trillion mark. Bitcoin price dropped by 5% in a single hour on Friday night, as concerns about the future of Silvergate bank intensified. FTX fallout has been affecting Silvergate, with the bank facing liquidity problems. 

Bitcoin price edged lower on Thursday, testing the $21,400 level support. If the BTC price declines, further support can be found near $20,000, while resistance may be encountered near $24,600. 

Ethereum price also declined on Thursday, dropping to the $1,520 level. If Ethereum's price declines, it may encounter support near $1,460; if it increases, resistance may be near $1,680.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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