Bitcoin Struggles at $40,000 – Crypto Assets Under Macro Stress | 04/19/22

Bitcoin and Co. are still in complex macroeconomic tension after the Easter holiday. Fears over interest rates, the eastern conflict between Russia and Ukraine and lingering corona concerns in China continue to raise eyebrows among investors. By Timo Emden

Interest rate fears, eastern conflict and corona worries as stressors

Even after the Easter holiday, crypto investors face many stressors. The main concern is and will remain that the US Federal Reserve is raising interest rates too quickly. The evolution of inflation in the United States continues to provide the currency policeman with many arguments to initiate a tight cycle of interest rate hikes. Concretely, this could mean that the interest rate band will be corrected upwards by 0.50 percentage points at the next meeting in May, which will be twice as fast as previously expected. Central bankers and stock traders are obviously not yet in agreement on the speed and scale. It is unlikely that an even tighter US monetary policy has been priced into the market.

Geopolitical risks not diminishing – China concerned about clouded economic outlook

In addition to interest rate concerns that have been simmering for months, there are also geopolitical risks that won’t let up. To date, there is no talk of an end to the war or a ceasefire between Russia and Ukraine. Even though the fear of war is no longer the dominant topic in global financial markets, it still has the potential to bring investors back to earth and thus dampen the urge to buy.

Finally, it is the recently growing corona concerns in Shanghai that are worrying investors, both here and across the Atlantic. Worries about the economic consequences of the corona lockdown in the financial and economic metropolis of Shanghai increasingly bring to mind memories of March 2020 and the outbreak of the coronavirus pandemic in the Western world.

US inflation remains a double-edged sword for markets

The development of inflation in the United States as well as in the Eurozone remains of great importance for crypto-assets. US inflation data released last week had repeatedly exceeded February’s value (7.9%) to 8.5% from the same month last year. The consumer price index is thus at its highest for about forty years, which has once again sounded the alarm bells of central bankers. The tone of the US Federal Reserve is likely to become much more aggressive in terms of the rate hike cycle in the coming weeks, putting pressure on risky asset classes like crypto assets in particular.

The lights of the Stock Exchange remain “red”

The macroeconomic tensions mentioned above should continue to set the tone in the days and weeks to come. Even if signs of a recovery can be observed again and again in the short term, these should turn out to be classic hot flashes at the end of the day. Given such an oversold market situation, however, short-term rallies are always possible, even from a technical perspective. The traffic lights on the stock market remain red for the time being. From a technical point of view, conquering the 200-day average around $48,100 remains elementary for a lasting trend reversal.

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