Thus far, 2022 has been a challenging year for global financial markets. Most stocks, cryptocurrencies, and commodities have dropped in value since the beginning of the year.
Meanwhile, investors have been speculating on the market’s next move since the global cryptocurrency market collapsed in the second week of May.
Moreover, the annual rate of consumer price inflation in the 19-member euro area reached a new record high of 8.1% in May. Over the medium term, the Governing Council seeks to restore inflation to its 2% benchmark.
As a result, the European Central Bank confirmed its intention to raise interest rates at its policy meeting and lowered its growth projections on Thursday.
Following its most recent monetary policy meeting, the Governing Council announced plans to increase its key interest rates by 25 basis points at its July monetary policy meeting.
The ECB anticipates a rate increase at its September meeting, but the increase will depend on the inflation curve over the medium term.
Shedding some light on the matter, Marcus Sotiriou, an analyst at the UK-based digital assets brokerage firm GlobalBlock, has provided illuminating insights on the subject.
Rate hike is a bearish indicator for the markets
Sotiriou feels that the ECB’s first rate hike in Europe in eleven years is a bearish signal for European markets. Amid such situations, altcoins continue to lose strength as Bitcoin struggles to create a clear path.
While a rate hike is imminent to prevent inflation from becoming an even larger concern, new data indicates that price increases are becoming more widespread across European products and services.
As a result, European economies will likely face a recession within the next few months, as earnings are constrained.
Meanwhile, the globalisation of markets implies that this will affect all industries; therefore, stocks and cryptocurrencies might see short-term declines.
In addition, CPI data for the United States will be announced tomorrow, June 10th. This will significantly influence the Federal Reserve’s future operations; therefore, it is also a highly anticipated event that will generate volatility.
Technical aspects and market sentiments
Meanwhile, the Crypto Fear & Greed Index hit 11, indicating extreme fear. This indicator tracks market sentiments of fear and greed, with 0 representing “Extreme Fear” and 100 representing “Extreme Greed.”
Sotiriou further elaborated on the market’s technical elements with additional highlights. He feels that identifying whether Bitcoin is in a bullish or bearish trend may be difficult at times. Still, the Ichimoku Cloud and monthly Kijun-sen indicators are useful to extrapolate the market’s broad tendency.
Rekt Capital’s graph below demonstrates that historically, the 20-Month Ichimoku Kijun-sen for Bitcoin has been a good indicator of the market’s direction.
It can be seen that when the Kijun successfully retests as support, the price tends to continue its upsurge. However, when the contrary happens, and the market tests the Kijun as resistance, the price may likely decline.
Currently, the monthly Kijun is acting as resistance since Bitcoin is trading below the Kijun level that it finished the previous month. It will be interesting to see what happens if this level is retested in the next weeks since retests of resistance often result in more losses.
If this line, which is in the high $30k zone, is regained on the monthly time frame, based on the trend reversals in 2016 and 2020, we may anticipate a shift in Bitcoin’s trajectory.
However, there was an exception to this pattern in 2014 when Bitcoin finished a month above the Kijun, this did not result in a trend reversal, and the breakout in this instance was not convincing.
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