Crypto markets volatile on fluctuating risk sentiment

Bitcoin was volatile on Wednesday, rising to the $59,500 level mid-day and then plunging below $58,000. If BTC price declines, support can be found at $53,300, while resistance may be encountered at $60,000. 

Ethereum gained strength on Wednesday, rising to the $3,100 level. If Ethereum's price declines, it may encounter support near $2,820, while if it increases, resistance may be encountered near $3,170.

Crypto markets have been under pressure by the war in Gaza. Fears that the war will spread in the Middle East are promoting a risk aversion sentiment putting pressure on risk assets such as cryptocurrencies. Hopes of a ceasefire deal in Gaza, however, boosted cryptocurrency prices this week.

Fluctuating risk sentiment is causing volatility in crypto markets. Cryptocurrency prices are affected by central banks’ interest rates. High interest rates are restricting economic growth putting pressure on risk assets, while the promise of rate cuts boosts crypto markets. The US Federal Reserve kept interest rates unchanged at its latest policy meeting, within a target range of 5.25% to 5.50%, as expected. 

Fed chair Jerome Powell testified on the Semi-Annual Monetary Policy Report before the US Senate Banking Committee on Tuesday and Wednesday. Powell stated that inflationary pressures in the US are easing and warned that keeping rates at restrictive levels for too long could weaken the economy, hinting at a rate cut in September. 

Markets were anticipating a more dovish stance, however, and odds of a rate cut in September dropped from 75% to 70%, putting pressure on risk assets. The uncertainty around Fed rate expectations is likely to continue in the coming months causing volatility in crypto markets. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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