Denys Peleshok, Head of Asia at CPT Markets predicted that cryptocurrencies could come under pressure as traders continue to consider the potential weakness in the US and European economies. Both economies could continue to see a slowdown in growth, contributing to a deterioration in investors’ sentiment and appetite for risk, in particular among institutional investors.
In addition, the approaching interest rate decisions in the US could also impact the direction of crypto prices to the downside over the short term. The strong expectations over another 25 basis point interest rate hike could push major cryptos toward additional losses.
These developments could weigh on bitcoin for a certain time after it was able to rally above the 30,000 dollar mark while traders consider the broader economic developments.
However, the cryptocurrency could see a brighter outlook over the long term thanks to a potentially softer monetary policy in the US in particular. The Federal Reserve could be inclined to pause and lower its interest rates in the coming months if economic conditions continue to deteriorate and the credit crunch materializes further.
The changing conditions and the uncertainty could play in favor of bitcoin and could help it gain a bigger share in the crypto market if investors move away from smaller equivalents. Increasing risk aversion could lead to more consolidation in the larger and relatively safer assets. In this regard, bitcoin could attract investors looking for more safety but who are still interested in being exposed to crypto assets.
Ethereum could follow the same trend as its larger counterpart but could see wider volatility, in particular as the asset recently saw a major upgrade to its network. It remains to be seen how the upgrade will impact the price of the crypto over the longer term as institutional investors could move into more staking positions.