Cryptocurrencies rally after suffering heavy losses

Cryptocurrencies rallied on Monday, after suffering heavy losses last week. Souring risk sentiment hit crypto markets hard after the collapse of FTX. The FTX token faced liquidity issues, triggering a generalized crypto market sell-off. Last week, Changpeng Zhao, the CEO of Binance, stated that the exchange would acquire FTX and absorb its losses. It was later announced, however, that Binance backed off from the deal on reviewing FTX’s books and on reports that the US Justice Department would investigate FTX. On Friday, FTX CEO Sam Bankman-Fried resigned and the company declared bankruptcy. These recent developments have undermined confidence in the crypto industry, giving rise to concerns of a cascading crypto crisis.

Bitcoin price recovered a little on Monday, rising to $16,700. If BTC declines, support can be found at $15,000, while resistance may be encountered at the psychological level of $20,000 and higher up near $21,000. 

Ethereum price also edged higher, trading around $1,250 on Monday. If Ethereum's price declines, it may encounter support at $1,190 and further down at the psychological level of $1,000, while if it increases, resistance may be encountered near the psychological level of $1,500 and further up at $1,660.

Cryptocurrency prices are also pushed down by aggressive rate hikes. As central banks raise interest rates, recession fears grow, reducing risk appetite. However, market expectations of future Fed rate hikes were considerably trimmed after last week’s US inflation report. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Rate hikes are expected to taper off in 2023 as the central bank moves into a stable interest rate.

Uncertainty over the US mid-term elections and renewed lockdowns in China have added further pressure on crypto markets. Risk sentiment improved last week, after the US inflation print for October was lower than expected, diminishing global recession concerns.

Markets will be awaiting the US mid-term elections outcome this week. Over the weekend, the Democratic party announced their victory in the key State of Nevada, which would have secured control of the House for the ruling party.  It seems, however, that the Democrats were too quick to rejoice, as votes are still being tallied and the battle for securing the Senate seems to be close.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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