Cryptocurrencies edge higher on improved risk sentiment

Bitcoin and other major cryptocurrencies rebounded last week on improved risk sentiment. Crypto and stock markets surged, as cooling US inflation helped scale back recession concerns, improving risk sentiment. On Monday, strong risk sentiment boosted cryptocurrencies even further as markets anticipate another soft US inflation print later in the week. Total crypto market capitalization is approaching the $1 Trillion mark once again after the recent surge in cryptocurrency prices.

Bitcoin price surged by over 20% last week, going past the $20,000 resistance level. Bitcoin extended gains on Monday, reaching $21,300. If the BTC price declines, support can be found near $16,370, while resistance may be encountered at $22,700. 

Ethereum price also edged higher on Monday, touching $1,600. If Ethereum's price declines, it may encounter support near $1,180, while if it increases, resistance may be encountered near $1,670.

US inflation is cooling, which may give the US Federal Reserve some leeway toward scaling back its interest rate increases. US headline inflation dropped to 6.5% year-on-year in December from 7.1% in November. 

Even though inflation rates remain high, cooling price pressures have reduced rate hike expectations, providing support for riskier assets. The Fed and other central banks are starting to scale back their aggressive rate hiking, raising hopes of a reversal in cryptocurrencies’ downfall. Many market participants believe that the cryptocurrency selloff is nearly over and that current low prices offer an investment opportunity.

This week, the US PPI inflation data on the 18th will provide a more complete picture of the direction of US inflation and are likely to affect cryptocurrency prices. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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