U.S. dollar liquidity is being withdrawn from markets and expectations of higher Federal Reserve interest rates are hurting crypto prices, the report says.
Ether, the second-largest cryptocurrency, has dropped about 75% from its November peak, analysts led by Sheena Shah wrote.
“When the ETH/BTC relative cross falls, it is a sign that the broader crypto enthusiasm is waning” as money is being pulled out of the more volatile alternative coins, the note says.
Although ether’s price cycle in U.S. dollar terms is similar to 2018, the analysts noted that this time round it’s largely institutional investors driving sales. In 2018, the share of retail trading activity was much higher.
The crypto-equivalent of quantitative tightening has continued, the bank said, fueling BTC’s slide to below $28,000, an important technical level. Any investors who bought BTC in the last year are now at a loss, and there are no obvious technical levels to watch until about $19,500, the 2017 high, it added.
For stablecoins, “issuance is contracting quickly,” the report says, and that has contributed to leverage halving within the “decentralized crypto ecosystem” since the beginning of May, and the destabilizing of crypto derivative prices as they diverge from their underlying assets.
DISCLOSURE
Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.