Cryptocurrencies slide on global recession concerns

Economic activity data on Monday fuelled global recession concerns, pushing cryptocurrency prices down. Services and Manufacturing PMI data were lower than expected across the board, indicating economic contraction in Europe, the US, and the UK.

Global developments are also causing fluctuations in risk sentiment, creating crypto market volatility. Markets have been in turmoil following British PM Liz Truss’ resignation last week and political instability persists even in the wake of the announcement of Rich Sunak’s win of the race for the new PM on Monday. Stock markets and crypto markets have been experiencing a roller coaster ride, with prices seesawing, as risk sentiment turns from positive to negative almost daily. In Japan, currency interventions are causing market turmoil, with the Yen seesawing wildly.

Bitcoin struggled to hold onto last week’s gains, with BTC price dropping to $19,200 on Monday. If BTC declines, support can be found at the psychological level of $19,000 and further down at $18,200, while resistance may be encountered near $19,800.

Ethereum's price dropped as well, falling below the $1,330 level. If Ethereum's price declines, it may encounter support at $1,260 and further down at $1,190, while if it increases, resistance may be encountered near $1,400.

Rising dollar and US yields reduce the appeal of risk assets, pushing cryptocurrency prices down. US Treasury yields soared last week, with the US 10-year bond yield climbing above 4.3%, its highest level since June 2008. The two-year yield, a more direct indicator of rate expectations, surged above 4.6%, its highest level since August 2007.

Inflation remains high in some of the world’s leading economies forcing Central Banks to tighten their monetary policies. Eurozone inflation cooled slightly in September dropping to 9.9% year-to-year, while UK inflation climbed back to 40-year highs of 10.1%. US annual inflation reached 8.2% in September, putting pressure on the Fed to continue raising interest rates. The Federal Reserve will likely continue its hawkish run, with a 75-bps rate hike expected at the next policy meeting in November. Continuous rate hikes, however, risk tipping the countries’ economies into recession.

This week, the ECB monetary policy meeting on the 27^th and the BOJ policy meeting on the 28^th is expected to cause market volatility that will likely extend to crypto markets as well.

BTC/USD 1hr Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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