First Mover Asia: Bitcoin, Ether tumble ahead of federal reserve meeting

An expected interest rate hike could spook investors away from higher-risk assets; the top 20 altcoins by market capitalization were firmly in the red.

Good morning. Here’s what’s happening this morning:

Market moves: Bitcoin fell as investor jitters grew over the upcoming Fed decision on combating inflation.

Technician’s take: A breakdown in BTC could damage the intermediate-term trend despite oversold signals.

Prices

Bitcoin (BTC): $46,963 -6.7%

Ether (ETH): $3,800 -8.75%

Markets

S&P 500: $4,668 -0.9%

Dow Jones Industrial Average: $35,650 -0.8%

Nasdaq: $15,413 -1.3%

Gold: $1,786 0.2%

Bitcoin fell by more than 7% on Monday, the biggest daily percentage drop since Dec. 4, as stocks in the U.S. also declined ahead of a Federal Reserve monetary policy decision later this week.

The Fed is expected to release its decision on Wednesday on whether it will move faster to wind down its bond purchases and signal it will start raising interest rates next year.

While a low interest rate environment has sent both stock and crypto markets skyrocketing this year, a rate hike and ending easy-money policies more quickly could, however, turn the market in a bearish direction.

Ether also fell sharply on Monday, despite the fact that the No. 2 cryptocurrency by market capitalization previously proved it was more resilient to macro headwinds than bitcoin. At the time of publication, ether was down by about 10% at one point in the past 24 hours.

The ether-to-bitcoin price chart, an indicator of bitcoin’s dominance relative to ether, dropped accordingly, after reaching its highest level since 2018.

According to crypto trading data firm Kaiko, the ether-to-bitcoin ratio chart has historically served as a gauge for investor sentiment.

“When the ratio increases, it suggests investors are rotating funds into ethereum and altcoin [alternative cryptocurrencies] markets, and vice versa,” Kaiko wrote in its newsletter on Monday. “Since the end of October, the ratio has been on a steady upward trend and recently topped its highest level since 2018.”

Technician’s take

Bitcoin daily price chart shows support/resistance with oversold RSI in second panel. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) remains under pressure as buyers failed to break above $50,000 over the past week.

The cryptocurrency is down about 6% over the past 24 hours and was trading around $47,300 at the time of publication.

Immediate support is seen at the 200-day moving average (around $46,700), which is also the bottom of a weeklong price range. Given negative momentum signals, however, bitcoin is at risk of breaking below support, which could damage the intermediate-term trend.

For now, the relative strength index (RSI) is the most oversold since May, which could encourage short-term buying. Still, upside appears to be limited toward the $50,000 resistance level.

If a breakdown occurs, the next level of support is seen around $40,000, which could stabilize the decline.

Important events

8:30 a.m. HGT/SGT (12:30 a.m. UTC): National Australia Bank business conditions/business confidence (Nov.)

12:30 p.m. HGT/SGT (4:30 a.m. UTC): Japan industrial production (Oct. YoY/MoM)

6 p.m. HGT/SGT (10 a.m. UTC): Eurostat industrial production (Oct. YoY/MoM)

7 p.m. HGT/SGT (11 a.m. UTC): European Blockchain Convention