Cryptocurrency selloff halted

Crypto markets pared some of their losses on Thursday, after plummeting on Wednesday, and major cryptocurrencies rallied. Risk sentiment fluctuates, causing volatility in risk assets. The ongoing debate around the US debt ceiling is causing economic uncertainty, causing volatility in cryptocurrency prices. Increasing debt fears on Wednesday drove risk sentiment down, putting pressure on cryptocurrencies.

US Treasury Secretary Janet Yellen has warned that the office would not meet all US government obligations by June 1. On Wednesday, Yellen reiterated that the US debt ceiling deadline remains in early June and cannot be extended without the US missing payments. Last week, House Speaker McCarthy and President Biden started talks on the debt ceiling. The two leaders have yet to reach an agreement on the US debt ceiling, but negotiations continue as the clock runs down. 

Bitcoin price steadied on Thursday rising to the $26,500 level. If the BTC price declines, support can be found near $26,000, while resistance may be encountered near $27,500. Reports that Tether, the largest asset-backed stablecoin, would invest up to 15% of its net profit into Bitcoin every month boosted Bitcoin. 

Ethereum price recovered on Thursday, climbing to the $1,810 level. If Ethereum's price declines, it may encounter support near $1,740, while if it increases, resistance may be encountered at $1,900.

Reports that Hong Kong would open crypto trading for retail investors boosted cryptocurrencies on Tuesday. Hong Kong's Securities and Futures Commission announced on Tuesday that it would accept applications from exchanges to offer crypto trading to retail investors from June 1. The announcement provided support for major cryptocurrencies on Tuesday, as Hong Kong will only accept tokens with a 12-month track record and substantial market capitalization. 

Signs that major central banks are starting to wind down their hiking cycles provide support for risk assets. The Federal Reserve raised interest rates by 25 basis points at its latest monetary policy meeting, bringing the benchmark interest rate to a 16-year high target range of 5.00% to 5.25%. The US Central Bank has signaled that its hawkish policy is coming to an end, boosting risk assets. US Federal Reserve Chair Jerome Powell indicated on Friday that the US Central Bank may pivot towards a more dovish direction.

The minutes of the latest Fed meeting were released on Wednesday, increasing the odds of a pivot in the Fed’s policy direction. According to the FOMC minutes, several Fed members advocated for a pause in rate hikes during the Fed’s last meeting in May.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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