Key points:
- US (and Global) Inflation Fears Send Risk Assets and Cryptocurrencies lower
- Bearish Charts Signals From Bitcoin and Ethereum
- Contagion Fears as Celsius Pauses Withdrawals and Economist, Peter Schiff Sends Bear Message
US (and Global) Inflation Fears Send Risk Assets and Cryptocurrencies lower
Financial markets risky assets plunged lower in early trading on Monday, led by Asian and European stock markets, and of particular note, pulled lower by US stock market futures. In addition, and given the current positive correlation between US equity markets (and notably the Nasdaq) and cryptocurrencies (which we pointed out in our note on Friday), the cryptocurrency market has plunged, with two of the major cryptocurrencies sending very negative chart signals, as we look at below.
This very negative price action for risky assets has been driven by two events last week. On Thursday, the European Central Bank (ECB) moves to a more hawkish stance, indicating a July rate hike and more aggressive rate increases than expected going forward. Furthermore, they announced the end to their Quantative Easing (QE) program. Of probably greater significance, however, was Friday’s release of the US Consumer Price Index (CPI) data. Again, as we highlighted in our note on Friday:
“Expectations were for the Core CPI to be at 0.5% MoM for May and 5.9% YoY. The actual data came in at 0.6% and 6%, respectively, higher than the consensus. The headline CPI data consensus was at 0.7% MoM and 8.3% YoY, with actual data posting at 1.0% and 8.6%, once more above forecasts.”
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These inflationary forces saw US stock averages plunge on Friday and pushed cryptocurrencies lower too. However, it was on Sunday trading and into Monday that cryptocurrencies have really reacted to this information, plunging aggressively lower through key support levels and according to a CNBC report wiping over $200 billion (and likely more) off of the cryptocurrency market.
Bearish Charts Signals From Bitcoin and Ethereum
Bearish breakouts from multi-week ranges by many cryptocurrencies, here highlighted by Bitcoin and Ethereum futures markets, highlight the potential for further price erosion into the summer.
Contagion Fears as Celsius Pauses Withdrawals and Economist, Peter Schiff Sends Bear Message
Alongside the inflation worries and sell-off in stock markets, the cryptocurrency markets are also suffering contagion fears, with Celsius, a crypto lending company, pausing all withdrawals. This negativity has been further fuelled by Economist Peter Schiff, who, in light of the current sell-off, stated, “The need to sell bitcoin to pay the bills will only get worse as the recession deepens,” with his target for Bitcoin to $20K and Ether to $1K.