Cryptocurrencies steady as dollar weakens

Most major cryptocurrencies declined last week, as US stocks and especially tech stocks fell. Crypto markets have been following the overall trends of stock markets, which have been pushed down by rising dollar and US bond yields.

Crypto markets gained some support on Wednesday though, as the dollar withdrew. The dollar index experienced a sharp drop on Wednesday from 101 to approximately 100.8, increasing the appeal of high-risk assets. 

Bitcoin price moved around the $41,000 level on Wednesday, gaining some support from the weakening dollar. If Bitcoin price declines, 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. Last week the Luna Foundation Guard (LFG), acquired a total of $273 million in Bitcoin, boosting the crypto currency’s price.

Ethereum price has also been boosted in the past few weeks, as the release of a long-awaited software upgrade is drawing near. On Wednesday, the Ethereum price tested the $3,075 level support. In case its price continues to decline, it may find further support near $2,820, while resistance may be encountered near $3,550.

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 is pointing to a steep rate hike at the Fed’s next policy meeting in May, putting pressure on cryptocurrencies. 

Record-high inflation data in the US have increased the odds of a 50 base points increase in the Fed’s benchmark interest rate in May. 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.

Continued Russian attacks against Ukraine and failing diplomatic talks between the two countries are promoting a risk-aversion sentiment, putting pressure on risk assets. 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. 

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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