Bitcoin, Ethereum and the rest of the expectant cryptocurrencies: is the downward cycle returning?

Bitcoin, Ethereum and the rest of the expectant cryptocurrencies: is the downward cycle returning?

He Bitcoin It had a slight drop but remains in the line of US$29,000 after the boost it received thanks to the Fed’s decision to raise rates by 0.25%, although also with a commitment from the central bank to decide a pause next month depending on the next data.

Analysts Mónica Triana and Carlos Gil, consulted by the site estrategiasdeinversion.com, considered that there will be new falls for both Bitcoin and for ethereum in the short term.

“Bitcoin is not seeing the same number of flows as it was at the beginning of the banking drama with Silicon Valley Bank. It is getting very ugly for the financial sector and that should mean problems for the economy in general”, explains Edward Moya, a senior market analyst at Oanda quoted by Bolsamanía, who also believes that the queen cryptocurrency is “anchored” at the level current “until the regulations are clarified”.

World Markets by TradingView

As has happened in previous episodes, with the bankruptcies of Signature Bank and SVB in March, or more recently that of First Republic Bank, which was bought by JP Morgan this week after the collapse of its shares, these new setbacks in the US financial system have benefited cryptocurrencies, highlighting the potential of digital assets as an alternative financial system.

In addition, bank woes make a pause in the Fed’s rate hike even more likely, which would be a breath of fresh air for risk assets including Bitcoin and other cryptocurrencies.

During the press conference, Powell declared that the Fed was opening the door wide to a “possible” pause in its tightening cycle. However, the central banker acknowledged that this decision is neither final nor certain and that rates will not be cut in 2023 if the base scenario is met.

In this sense, analysts at Oxford Economics believe that “there is a risk” that this pause is temporary and the market seems to have interpreted it in the same way. “The US stock market hasn’t behaved according to the book and investors are confused as to why we haven’t seen a stellar rally,” said Naeem Aslam, chief investment officer at Zaye Capital Markets.

This expert believes that the reason for this behavior is that the threat of a possible recession is “serious”, especially when there is a possibility that another regional bank “falls into the hands of the Wall Street giants”. He also points out that the market does not believe that the sector is as “stable and robust” as the Fed and Treasury are selling.

“The reality is that rates in the US are at a level that is causing enormous pain and inflation remains sticky. Now that the Federal Reserve has broken the cycle of raising interest rates, what will happen to inflation? Certainly if we don’t see any further improvement in inflation readings or, worse still, if we see inflation rising as energy prices remain well above pre-Covid-19 or pre-war times from Ukraine, we could have a lot of problems”, concludes.

On the other hand, analysts point out that the United States employment report, which will be released this Friday, will also be another catalyst for the price of cryptocurrencies. The ADP consultancy report, which was published this past Wednesday, estimates that the world’s leading economy created 296,000 jobs in April, many more than those expected by consensus. On the other hand, another bank failure could boost the price of digital assets as occurred during the failures of Silicon Valley Bank and Signature Bank in March.

Source: Ambito

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