On-chain and technical indicators also hint at more pain for Bitcoin and Ethereum for the remainder of 2022.
Bitcoin (BTC) and Ethereum’s native token, Ether (ETH), started the week on a depressive note as investors braced themselves for a flurry of rate hike decisions from central banks, including the U.S. Federal Reserve and Bank of England.
On Sept. 19, BTC’s price failed to regain the $20,000 psychological support zone. The BTC/USD pair slipped by 6.5% to around $18,250, while ETH dropped 4% to approximately $1,280.
Their gloomy performance came as a part of a broader decline that started in mid-August, wherein BTC and ETH wiped a total of 28% and 37% off their market valuation, respectively.
This week, the Fed and a number of its global peers will potentially attack rising inflation by further raising interest rates.
Data compiled by Bloomberg suggests that the U.S. central bank, alongside Sweden’s Riksbank, the Swiss National Bank, Norway’s Norges Bank, the Bank of England and others, will raise lending rates by a combined 500 basis points, or 5%.
The market’s riskier assets have reacted negatively to these upcoming policy meetings.
Last week, MSCI’s flagship global equity index, ACWI, which combines developed and emerging market stocks, fell 4.25% to nearly $84. At its peak, the index was trading for $107.39 in November 2021. Interestingly, Bitcoin and Ethereum peaked in the same month at $69,000 and $4,950, respectively.
Therefore, this growing correlation against the prospect of global rate hikes could continue to pressure BTC and ETH lower despite their growth-oriented narratives.
#Ethereum Merge resulting in downside teaches us a valuable lesson.
The global macro environment supersedes everything.
If the global markets were generally bullish, then the Merge would have resulted in a pump. But it didn’t.
This goes for #Bitcoin as well.
Instead, investors may seek safety in low-volatile assets, including the U.S. dollar and government bonds.
For instance, the U.S. dollar index, a barometer to measure the greenback’s strength, rose by 0.5% to 110 on Sept. 19 after its highest weekly close since 2002.
Similarly, six-month U.S. Treasury notes yield 3.79% if held until maturity, thus offering investors a safer investment alternative with guaranteed returns in the short term. Similarly, the U.S. 10-year Treasury yield has surpassed its June high when Bitcoin dropped to yearly lows.
Other shorter-dated and longer-dated T-bills yield similar returns.
A mix of on-chain and technical indicators further hints at an imminent price crash in Bitcoin and Ethereum markets.
First, the Bitcoin Spent Output Age Bands (seven–10 years), which tracks spent BTC and bundles them into categories depending on their age, showed the movement of more than 5,000 BTC on Sept. 4. MACD_D, a user at the on-chain analytics platform CryptoQuant, argues that this is typically bad news for the price of Bitcoin.
“If the holder, which held BTC in its seventh year, moves more than 5,000 BTC, there could be a strong downward trend in the future,” the verified user wrote, stressing:
The user also highlighted a recent rise in Ether dominance to over 20%, noting that it typically hints at a bubble that’s about to pop. An excerpt reads:
Related: Goldman Sachs’ bearish macro-outlook puts Bitcoin at risk of crashing to $12K
From a technical standpoint, Bitcoin has entered the breakdown stage of its prevailing “bear flag” pattern, now eyeing an extended decline toward the flag’s profit target at around $14,500 in 2022.
Meanwhile, Ether has also been breaking out of a symmetrical triangle. As a result, ETH price could drop toward $750 if the bearish continuation pattern plays out, along with weakening technicals for the ETH/BTC pair as well.
In other words, a 40% ETH price crash is on the table before the end of the year.
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