Analysts believe that a near-term monetary tightening could cause a global crash across major asset classes, such as crypto and equities. As a result of a stronger dollar, cryptocurrencies enjoyed a nearly weeklong run above resistance levels. This caused global equity and currency markets to decline.
Cardano and Ethereum slide on the news of a strengthened dollar
Cardano (ADA), Ether (ETH) both fell almost 9% over the past 24 hours. They lost a week of gains to become one of the largest decliners among major cryptocurrencies. The Ether slide occurred despite activation of the Bellatrix update, the Ethereum network’s last “hard fork” prior to the Merge.
Bitcoin and other cryptocurrencies are affected
Bitcoin traded below \$18,900 at the beginning of European hours, falling 5.5%. BNB and Solana’s SOL dropped 5%, XRP dropped 4%, and Polkadot’s DOT lost 7%. Futures tracking major tokens have racked up $327 Million in liquidations; XRP dropped 4%; and Polkadot’s DOT lost 7%. This is the first time that the total cryptocurrency market capitalization has fallen below $1 trillion since July.
Average losses on memecoins dogecoin, shiba Inu and other cryptocoins were 6%. Ethereum Classic’s ETC dropped some 16% on Tuesday after a double digit rally. Terra’s old Luna Classic tokens saw a 20% slide following more than doubling in the past week.
Overnight, concerns about the U.S. Federal Reserve’s monetary tightening caused the dollar to rise. It reached a 24-year high against Japan’s yen and a lifetime high against the Indian rupee. Tech stocks fell on Tuesday, with the S&P 500 losing 0.4% and Nasdaq 100 losing 0.7%.
More news coming will affect crypto markets, CPI Data, and Europe’s rate hike decision this week
Arcane Research analysts warned Wednesday of volatility as August’s U.S. CPI data will be released on September 13th and the European Central Bank’s interest rate decision will be made Thursday. According to forecasts, the ECB will increase its interest rate by 75 basis points. One basis point equals one hundredth of a percent point.
Analysts said that “These macro events, together with the Merge might be catalysts to going forward”, and traders maintained their bullishness on ether ahead its Merge event.
According to Chris Esparza (founder of Vault Finance), bitcoin’s impending tightening by the Fed is a “bad outlook”.
Esparza stated that tightening generally decreases the printing cash to support the economy, as we did in the COVID-19 panic years. He told CoinDesk that Bitcoin investors should focus on the assets themselves and not on macroeconomic market gauges.
“With countries forming functional regulations to guide the emerging ecosystem, the level and quality of adoption will grow over the long-term, making it a favorable stance for investors to get in now.”