Bank collapse and recession risks: what affects the cryptocurrency market

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Opinion

Last week was busyevents: the US Federal Reserve shared its plans, a series of bank collapses continued, updates were released on some digital platforms. How did this affect prices?

Bitcoin

Bitcoin price for the week from April 28 to May 5decreased by 2.5%. Moreover, almost the entire decline occurred in the first three days. Starting on Tuesday, BTC began to grow, but it was not possible to win back the losses from the beginning of the week.

Source: tradingview.com

An important event was
press conference of the Federal Committee foropen market operations of the US Federal Reserve (FOMC). It announced an increase in the base rate by 0.25 points. Now the bar is in the range of 5-5.25%. It should be noted that Fed Chairman Jerome Powell this time refrained from rhetoric about the need to further increase rates. Which, in theory, should have pushed cryptocurrency prices up. There has been growth, but not cosmic growth. It appears that the Fed's actions coincided with the expectations of most investors, and these expectations have already been factored into the market price.

In addition, the banking crisis continues in the United States. The squabbles around the Californian First Republic Bank, which eventually
was closed, another one started having problemscredit organization. This time it was Beverly Hills-based PacWest Bancorp that caught the attention. Between May 2 and May 4, its shares fell almost 65%. The bank itself stated that it is studying the current state of affairs,  considering such options as raising capital or
even the sale of a business. Problems also arose at the Arizona bank Western Alliance. Its shares fell almost 50% between May 2 and May 4. It was reported that the bank was also considering a sale, but later information
was refuted by representatives of the Western Alliance itself.

It would seem that the problems of banks shouldpush the crypto market up, as was the case, for example, in March. Then three large credit institutions (Silvergate Bank, Sillicon Valley Bank and Signature Bank) crashed at once. However, a bullish rally did not happen this time. Why is that?

There are several points of view. By
according to the head of the cryptoindex platformPhuture Charles Storry, the regulator’s actions are repelling many large investors, and until their trust is returned, no price surges should be expected. And according to Michael Safai, managing partner of the algorithmic digital asset trading platform Dexterity Capital, the problem lies in the lack of liquidity that arose after the collapse of FTX at the end of 2022. The Block reported a decrease in cryptocurrency trading volume after the introduction of exchanges Binance commission, which could have a chilling effect.

From a technical analysis point of view, amongBitcoin investors are experiencing a certain calm without a clearly defined trend. The resistance level is around $30 000, the support level is $27 700.

Source: tradingview.com

The fear and greed index fell by three points compared to a week ago. Now it's 61. It's still saying
about the predominance of greed over fear.

Ethereum

Ethereum has only grown by0.54%. The second largest cryptocurrency in the world by capitalization has a picture where sessions alternate: a day of growth - a day of fall, two days of growth - two days of fall, a day of growth - a day of fall. Actually, this is precisely what explains the extremely low volatility over the past seven days.

Source: tradingview.com

The price of ether has not moved for the past two weekssudden jumps. However, the situation should change soon. In any case, this is the point of view held by the specialists of the Santiment analytical platform:

“The number of active deposits in ETH oneight-month high. Having studied the most likely reason, we can say that this most likely indicates an increase in the volatility of ether. It will be similar to the spikes that were observed during Merge and the collapse of FTX.”

On the Ethereum platform itself it was revealedinformation about the vulnerabilities that were identified as part of the Ethereum Bug Bounty. A total of nine bugs were announced: Erigon, Go Ethereum, Lodestar, Nethermind, Lighthouse, Prysm, Teku, Besu, Nimbus. No one managed to take the maximum prize of $250 000 for discovering a vulnerability. The biggest win was a jackpot of $50 000, which went to the user
scio for
finding bugs in the Lighthouse consensus client.

From the point of view of technical analysis, Ether is stillis in lateral movement. The nearest resistance level is $1,962.7, the nearest support level is $1 787. A positive signal for ETH holders is the fact that the coin is trading above both the 50-day moving average (marked in blue) and the 200-day moving average (marked in yellow):

Source: tradingview.com

Cardano

Cardano's ADA token for the period from April 28 toOn May 5, I lost more than BTC. The decrease was about 4%. Since April 16th, Cardano has only been able to close one session, on April 22nd, up more than 3%. All other days the price either fell or grew weaker.

Source: tradingview.com

The main news for Cardano was the launch
Hydra updates on the main network.The update is a layer 2 protocol that will run on top of the existing blockchain. Hydra is designed to increase transaction processing speed and overall operational efficiency. This is achieved by creating a large number of “heads”, each of which can process a subnet of transactions independently. Such an initiative allows the processing process to be carried out in parallel, greatly increasing the overall size of the network without compromising security and decentralization. One more
A key feature of Hydra is horizontal scaling, meaning that the protocol will handle more transactions as the number of users on the network increases. 

Investors, however, ignored the updateCardano. The price on Friday, May 5, decreases by 0.26%. From the point of view of technical analysis, the support and resistance levels have not changed since last week and are respectively: $0.372 and $0.42.

Source: tradingview.com

So, it’s time for the cryptocurrency market tocalm. During the week there were no strong movements, neither in Bitcoin, nor in Ether, nor in Cardano. The US Federal Reserve meeting, the ongoing problems of banks and updates failed to have any visible impact on quotes.

This material and the information in it does not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.

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