Bitcoin, Ethereum plummet, pushed down by hawkish Fed policy

Crypto markets have been following the overall trends of stock markets, experiencing heavy losses as the crisis in Ukraine has turned investors’ interest towards safer assets. Major Cryptocurrency prices declined last week, pushed down by increased risk-aversion sentiment, as well as by a shift of major central banks towards a more hawkish fiscal policy.

Reports of renewed Russian attacks against Ukraine have dashed hopes for a diplomatic resolution to the conflict any time soon, putting pressure on risk assets. Diplomatic talks continue, although a de-escalation of the crisis still seems to be some way off, and tensions between Russia and Ukraine intensified. New western sanctions on Russia are also reducing demand for risk assets, with both the US and the EU announcing a new round of sanctions, targeting financial institutions, commodities and individuals. 

Over the weekend, the Luna Foundation Guard (LFG), acquired $173 million in bitcoin, boosting its price a little, although it could not prevent the bears from gaining ground on Monday, driving the BTC's price down.

Bitcoin price fell below the $40,000 level on Monday, as many market participants turned towards safe-haven assets. If Bitcoin price declines further, it may find support at $37,500 and $36,000, while resistance may be found near $48,200 and further up at the psychological level of $50,000. 

Ethereum's price has been boosted over the past couple of weeks, as the release of a long-awaited software upgrade is drawing near. Ethereum price also tumbled on Monday however, falling below the $3,075 level support. In case its price continues to decline, it may find support near $2,820, while resistance may be encountered near $3,800.

The shift of major central banks towards a more hawkish fiscal policy has been putting pressure on cryptocurrencies. Most major Central Banks are turning towards a tighter policy and a return to pre-pandemic interest rates, driving cryptocurrency prices down. Increasingly hawkish Fed rhetoric in the past couple of weeks is pointing to a steep rate hike of 50 base points at the Fed’s next policy meeting in May, putting pressure on cryptocurrencies. 

On the other hand, investors are starting to use cryptocurrencies as a hedge against inflation, which could provide a boost to crypto markets, as inflation is expected to peak in the following months.

In addition, most major cryptocurrencies have received a boost over the past month, as demand from Russian and Ukrainian markets increased. Bitcoin volume from Russian markets has increased considerably, as Russian investors aim to escape the plummeting Rouble and Russian sanctions. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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