Cryptos, Stocks Slide Due to Central Bank Decisions, Merge Aftermath

Cryptos, Stocks Slide Due to Central Bank Decisions, Merge Aftermath

Cryptocurrencies and global stocks are heading for a volatile week amid ongoing turmoil in the digital assets space and monetary policy decisions from various central banks.

Bitcoin briefly rose above $20,000 earlier in the week before falling below $19,000 on Tuesday. Ether lost 1.2% and fell below $1,300 for the first time since mid-July.

“Bitcoin and the crypto market experienced a significant rally on Monday before encountering resistance at $19,666 – the 2017 bull market high, a key resistance.” Marcus Sotiriou, an analyst at publicly traded digital asset broker GlobalBlock, wrote in a note on Tuesday. “Investors are very cautious about the Federal Reserve’s decision tomorrow.”

The S&P 500 and the tech-heavy Nasdaq also trended lower during Tuesday's trading session, down 1% and 0.6%, respectively.

Ether extended its loss from earlier this month following Ethereum's highly anticipated merger, which saw the second-largest blockchain switch from proof-of-work to proof-of-stake. The currency has lost more than 7% in the past five days since the successful completion of the merger early Thursday morning.

"We see a classic example of market psychology. Project offers grew due to expectations of a major event. In this case, many traders bought ETH in advance to resell the increasing hype on the principle of “buy the rumor, sell the fact,” said Serhii Zhdanov, CEO of crypto exchange EXMO. “Of course, there were fewer buyers after the merger was completed.”

Zhdanov is confident that the price can reverse, especially given that lower transaction costs mean the network will be more accessible to users.

“This can increase the adoption of Dapps operating in the Ethereum ecosystem,” he added.

The world is bracing for potentially bearish news

Last week's volatility shows no signs of slowing down, with more market-moving events planned for the coming days

On Thursday, the Bank of Japan is scheduled to announce its monetary policy decision and the Bank of England will announce its interest rate decision. Initial jobless claims in the US are also expected on Thursday. Investors will look for evidence of labor market strength to gauge the likelihood of a recession.

On the eve of the Fed's rate hike decision in September, futures markets predicted an 82% chance of a 75 basis point hike and an 18% chance of a 100 basis point hike Data from the CME group.

Crypto markets also reeled on Tuesday after reports that liquidity provider Wintermute's DeFi operations had encountered a $160 million breach. The latest incident marks the company's second hack this year. In June, 20 million Optimism tokens were stolen by exploiting a failed transaction with Wintermute.

“This is a negative development within the DeFi space and will not help the confidence of TradFi institutions (traditional financial institutions) that want to enter the DeFi space,” Sotiriou said. “As Wintermute was one of the largest liquidity providers in the industry, they may be forced to remove liquidity to further mitigate risks from their loss.”

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The article Cryptos, Equities Slide on Central Bank Decisions, Merge Aftermath is not financial advice.