Bitcoin and the rest of the cryptocurrency market continue to decline for a third consecutive day, however, bitcoin has not yet broken below the weekly low of $26,374. The crypto market is being strongly influenced by three main factors; the hikes in interest rates, the stock market, and inflation. In addition to this, herd mentality is also playing its role with many investors selling their cryptos due to fear of further declines.
Analysts have argued that the hawkish tone, taken by the US Federal Reserve and now the ECB, is putting pressure on the stock market, and after it, on the cryptocurrency sector. Bloomberg analysts have advised the two are acting in correlation with each other. After all, a hawkish tone means two things; higher interest rates and less money supply.
This week, the minutes of the latest Federal Open Market Committee meeting confirmed the likelihood of the continuation of the cycle of adjustments to interest rates after bringing the inflation to the neutral zone of 2.50–2.75%. A serious drop in digital asset prices is being held back by heightened recession risks in the US economy.
It should also be noted that under the pressure of monetary factors, BTC remains the most popular among investors. The index of its dominance is steadily growing during the current month, while the overall demand for altcoins is declining.
Inflated cost of living paired with the increased cost of borrowing has lowered the risk appetite of the market, and resulted in participants cashing in their investments. However, if a recession does take place this could potentially increase the demand for cryptocurrencies, specifically if weaker currencies become further unstable.
Comments made by the ECB President, regarding the safety of cryptocurrencies and regulation, also put some pressure on the market. The ECB called for additional regulation to protect those interested in making significant investments in such assets. As for the digital Euro, according to the ECB President, it will be backed by ECB assets and therefore it will be much more reliable as an investment.
Among the news of cryptocurrency enthusiasts, it is worth noting the statement made by the developers of the Ethereum network regarding its transition to the Proof-of-Stake (PoS) algorithm. The main Ropsten test network will start on the new algorithm on 8th June, after which, in the absence of glitches, the developers will confirm the date for the transition to PoS and the Ethereum main network. According to the leading specialist Preston Van Loon, the approximate date is August of this year. This information was also confirmed by the founder of Ethereum.
Tether has also advised they are creating a new stablecoin, which will be pegged to the Mexican Peso, and therefore use MXNT as its ticker symbol. According to Company Management, the need to create a new stablecoin arose due to the demand for digital assets among residents of Latin America. Currently, up to 40% of Mexican firms use blockchain to some extent. MXNT will be the fourth stablecoin issued by Tether.
The price of bitcoin continues to move in a sideways direction. When the price attempts a bullish trend it collapses at a lower price but does not break to a lower price low. As a result, we have witnessed a descending triangle which according to wave theories can indicate a pause in the larger downward trend.
Over the past 1 hour the price has slightly increased but remains far below previously reached highs.
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