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.
Bitcoin price fails to hold $20,000
On Sep. 19, BTC’s price has 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.
A 500 bps global rate hike ahead?
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.
— Kevin Svenson (@KevinSvenson_) September 18, 2022
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 Sep. 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…
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