Cryptocurrency markets kicked off the week under strong selling pressure, driven by sudden shifts in US interest rate expectations.
In a recent analysis from crypto market maker Wintermute, analysts warned that if Bitcoin breaks below the $75,000 level, the price could quickly slide toward $70,000. They noted that Bitcoin recently failed to break above the key 200-day moving average during its first major macroeconomic stress test. This suggests the previous rally was largely fueled by short position closures rather than fresh capital inflows.
Macro headwinds mount
On the macroeconomic front, the picture is getting tighter. US consumer inflation is rising faster than expected, and core inflation remains stubbornly high. Real wages are declining, and the 10-year Treasury yield climbing to 4.58% is adding pressure on risky assets like cryptocurrencies.
Adding to the unease: the incoming Federal Reserve chair, who takes office in three weeks, is seen as more hawkish. Markets are already nervous about potential tighter monetary policy. In just five trading days, investors have shifted from expecting interest rate cuts to pricing in the possibility of rate hikes. That is a remarkable turnaround.
Capital flowing to inflation beneficiaries
The performance gap across asset classes seems to confirm this shift. Brent crude oil gained 8.6% last week, while Bitcoin fell 5.7% and Ethereum lost 10.2%. Analysts point out that capital appears to be moving into assets that thrive on inflation.
Wintermute emphasizes that the $76,000 to $78,000 range is a critical support zone for Bitcoin. Holding this level could boost market confidence. But a drop below $75,000, combined with continued ETF outflows, might trigger a rapid pullback to the $70,000 level.
(This is not investment advice.)
