- Bitcoin turns bearish below $40,000
- Ethereum and Dogecoin are holding steady at support levels
- Growing stock and crypto market correlation
A sell-off wave that has gripped the equity market has found its way into the cryptocurrency sector. Bitcoin, Ethereum, and Dogecoin are some of the coins under immense pressure amid a buildup of risk-off trades in the capital markets.
Investors are increasingly shunning speculative assets in the aftermath of the Federal Reserve hiking interest rates by 50 basis points and hinting at a similar hike at its next meeting. The hawkish stance has sent the dollar higher, forcing investors to switch attention to high-yielding assets.
The risk-off mood is one factor that continues to fuel a sell-off as Bitcoin continues to edge lower after struggling to power through the $40,000 handle. BTCUSD has already plunged to two-month lows at the $36,300 handle and is at risk of further losses.
With short sellers in control, BTCUSD could tank to 2022 lows near the $33,133 handle in continuation of the long-term downtrend. Failure to find support above the $33,000 handle could leave Bitcoin susceptible to plunging below the $30,000 pivotal level.
Ethereum at support
While Bitcoin remains under immense pressure, Ethereum tries to hold above a crucial $2,740 support level. A daily close below the support level could leave the coin exposed to further downside action resulting in a pullback to the $2,500 area, the next key support level.
However, ETHUSD finding support above the $2,700 should open the door for a potential bounce back to the $3,000 level. On the flip side, the coin remains bearish below the $3,000 level and is likely to continue edging lower on the broader sector turning bearish in recent days.
Dogecoin is another coin trading at a pivotal support level as the broader cryptocurrency sector remains under pressure. A pullback to the $0.128 level leaves the meme coin at risk of edging lower on closing below the $0.124 support level.
The sell-off being experienced in the cryptocurrency market is correlated to developments in the stock markets. The two markets have been trading in tandem in recent months. Stocks coming under pressure amid rate hike push appear to have spilled over into the equity markets.
Investors selling risky assets and turning to safe havens such as bonds and treasuries is one factor that should continue to weigh on sentiments in the crypto markets. The US Gross Domestic Product declining 1.4% in the first quarter is already fuelling concerns about the US economy being in recession. With inflation at 40-year highs and prices increasing faster than wages, investors have been forced off non-essential sets such as cryptocurrencies.
Bullish long term outlook
Amid the sell-off, the long-term outlook remains bullish for Ethereum, Dogecoin, and Bitcoin. Reports that Congress is considering allowing companies to include digital assets in their 401K plans are a development that could fuel a swath of investors into the sector. California has also announced plans to look into regulations that could accelerate digital assets adoption.
A retailer such as Gucci accepting cryptocurrency payment is another frontier expected to strengthen cryptocurrencies utility, therefore, sentiments in the market. Broader crypto adoption and a flood of developers into the space continue to affirm cryptocurrencies’ long-term prospects.
Bitcoin, Ethereum, and Dogecoin could remain under pressure in the medium term as the fall-off in the stock markets spills over, targeting speculative assets. However, the long-term outlook remains bullish amid growing crypto use cases in various sectors.