(Kitco News) – Traders in the crypto market experienced a brief period of climbing prices early on Tuesday before the bottom fell out of the market as concerns that the Federal Reserve’s rate-hiking campaign to fight inflation will result in an economic downturn.
Chicago Fed President Charles Evans attempted to ease these concerns while speaking at a forum in London, saying that the U.S. central bank will need to raise interest rates by at least another percentage point this year but does not see the labor market heading into “recession-like” conditions.
Despite these reassurances, global markets trended lower in the afternoon on Tuesday, with the Nasdaq closing with a minimal gain of 0.25% while the S&P and Dow closed down 0.21% and 0.43%, respectively.
Data from TradingView shows that Bitcoin (BTC) briefly climbed above support at $20,000 in the early trading hours only to come crashing back down to a daily low of $18,840 in the afternoon trading session before bulls arrived to bid it back above support at $19,000.
BTC/USD 4-hour chart. Source: TradingView
This early morning move higher was addressed in the morning Bitcoin update from senior Kitco technical analyst Jim Wyckoff, who noted that “BC bulls have gained some upside momentum early this week, but need to show more power in order to break the price downtrend in place on the daily bar chart.”
Wyckoff’s warning to bulls was prescient, but they failed to follow through as seen by the move lower in the afternoon. As it stands now, “bears still have the slight overall near-term technical advantage,” according to Wyckoff.
Traders flee the sinking pound
Insight into the source of weakness across all financial markets, not just crypto, was provided by independent market analyst and pseudonymous Twitter user Crypto Tony, who posted the following tweet warning that “the Dollar has not quite topped out yet.”
Keep an eye on both of these if you plan on leveraging BTC pic.twitter.com/wW85LG0O4o
— Crypto Tony (@CryptoTony__) September 27, 2022
And it is not just BTC that the strong dollar is affecting as the value of the British pound plunged, with the GBP/USD pair hitting $1.03, its lowest value on record. This, in turn, has sparked a wave of BTC buying by holders of the pound looking to preserve their purchasing power.
According to data provided by James Butterfill, head of research at CoinShares, trade volume for the GBP/BTC pair on exchanges Bitstamp and Bitfinex, which usually see a combined total volume of $70 million per day, surged to $881 million on Sept. 26 – an increase of over 1,150%.
It won’t be surprising to see a similar increase in buying activity by holders of other fiat currencies looking for alternatives but not interested in holding the dollar.
Altcoins follow Bitcoin’s lead
On the whole, the afternoon downturn hit the crypto market hard, leaving all but the stablecoins in the red on the day, for the most part.
Daily cryptocurrency market performance. Source: Coin360
The most notable gainers out of the top 200 according to data from CoinMarketCap were an 8.84% gain in Reserve Rights (RSR), an 8.17% increase for STEPN (STEPN), and a 7.45% climb in price for Polymath (POLY).
The overall cryptocurrency market cap now stands at $929 billion, and Bitcoin’s dominance rate is 39.3%.
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