Bitcoin (BTC), and Ethereum’s native token Ether (ETH) started the week on a downbeat note, as investors prepared themselves for a flurry of rate-hike decisions by central banks including the U.S. Federal Reserve (US Federal Reserve) and Bank of England (BoE).
Bitcoin price drops to $20,000
Sep. 19: BTC’s price failed to recover the $20,000 psychological support zone. BTC/USD fell 6.5% to $18,250 while ETH declined 4% to $1,280.
Their gloomy performance was part of a wider decline that began in mid-August. BTC and ETH had lost a total 28% and 37% of their market value, respectively.
BTC/USD and daily chart of ETH/USD prices Source: TradingView
500 bps global rate hike ahead?
The Fed and some of its global counterparts will likely attempt to combat rising inflation this week by raising interest rates.
Bloomberg data suggests that the U.S. central banks, along with Sweden’s Riksbank and the Swiss National Bank, Norway’s Norges Bank, and the Bank of England will increase lending rates by a total of 500 basis points or 5%.
The week ended Sep. 24, and central banks made rate decisions. Source: Bloomberg
These policy meetings have been met with negative reactions from market risk assets.
The MSCI’s flagship global equity indicator, ACWI, which includes both developed and emerging market stocks fell by 4.25% last week to $84. The index traded for $107.39 at its peak in November 2021. It is interesting to note that Bitcoin and Ethereum reached their peak in November 2021 at $69,000 and $4950, respectively.
Weekly price chart for ACWI Source: TradingView
This growing correlation could result in BTC and ETH being pressured lower despite their growth-oriented narratives.
#Ethereum Merge, which leads to downside, teaches us an important lesson. Everything is influenced by the global macro environment. If global markets had been generally bullish, the Merge would have produced a pump. It didn’t. This is true for #Bitcoin, too.
— Kevin Svenson (@KevinSvenson_) September 18, 2022
Investors may instead seek safety in low-volatile assets such as the U.S. Dollar and government bonds.
The U.S. Dollar index, which is a barometer for the strength of the greenback, increased by 0.5% to 110 on September 19, after reaching its highest weekly close since 2002.
The U.S. Treasury Notes for six months yield 3.79%, if they are held until maturity. This offers investors a safer option and guarantees short-term returns. The U.S. 10-year Treasury yield also surpassed its June peak, when Bitcoin fell to yearly lows.
U.S. Treasury Yields, Sep. 19. Source: Bloomberg
Similar returns can be found in other T-bills, both shorter-dated and more long-dated.
Bitcoin to $14K-15K, Ethereum to $750 Next
An assortment of technical and on-chain indicators also hint at an impending price crash in the Bitcoin and Ethereum markets.
First, the Bitcoin SPent Output Age Bands (7-10 Years), which tracks BTC and ties them together into age-specific categories, showed a movement of over 5,000 BTC on Sep. MACD_D, an user of the on-chain analytics platform CryptoQuant argues that this is usually bad news for Bitcoin’s price.
The verified user stressed that if the holder of BTC moves more than 5,000BTC in its seventh-year, then there could be a strong downtrend in the future.
“This indicator was a signal 7 in the past, and it fell 6 times except for one (07 February ’21). The fact that the long-term holder has moved the BTC indicates that there will be an unexpected price movement in future.”
Age bands for Bitcoin’s output (7-10 years). Source: CryptoQuant
A recent increase in Ether dominance of over 20% was also mentioned by the user, noting that this usually indicates a bubble about to burst. Excerpts:
“When #BTC is just transverse, an excessive rise in Ethereum causes a bubble. It is a good time to get into the short position if the ETH dominance increases by more than 20%.
Related: Goldman Sachs’ bearish macro outlook places Bitcoin at risk of plummeting to $12K
Technically, Bitcoin is now in the “bear flag” stage, and will likely see a prolonged decline towards the flag’s profit target of $14,500 by 2022.
BTC/USD daily chart with bear flag breakdown. Source: TradingView
Ether is also breaking out of a symmetrical triangular pattern. If the bearish continuation pattern continues, the ETH price could fall to $750. There may also be a weakening technical for the ETH/BTC pairing.
Daily price chart for ETH/USD with symmetrical triangle breakdown. Source: TradingView
Also, a 40% ETH price crash could be possible before the year ends.
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