Market Losses: Bitcoin and Ethereum Drop
The crypto market has experienced a decline today, with Ethereum's post-Shapella rally losing momentum and the overall cryptocurrency market capitalization dropping by almost 4% in 24 hours. As analysts believed Bitcoin might be on the verge of entering a new bull market, regulatory uncertainty and weakening macroeconomic conditions caused a downturn in the cryptocurrency market.
Bitcoin and Ether Struggle to Maintain Gains
On April 19, the Bitcoin price reached a 7-day low of $29,158 after failing to hold the crucial $30,000 mark. Traders are concerned that further corrections could lead to revisiting bear market lows. Ether, which surpassed the $2,100 level after the Shapella upgrade and reached an 11-month high, also experienced a 7-day low of $1,972 on April 19 despite ETH staking deposits surpassing withdrawals the previous day.
Fears of U.S. Regulatory Crackdown Affect Crypto Market
SEC Chair Gary Gensler's appearance before the U.S. House Financial Services Committee for an oversight hearing on April 18 likely unsettled crypto traders. During the hearing, Gensler needed to provide a clear answer regarding Ethereum's status as a commodity or security. Additionally, on April 17, the SEC filed a lawsuit against crypto exchange Bittrex, accusing it of operating an unregistered national securities exchange, broker, and clearing agency. Gensler warned the crypto industry to follow established rules and laws to protect investors.
Hawkish Fed and Economic Weakness Impact on Risky Assets
Despite concerns about a banking crisis and hopes for a more dovish stance, Federal Reserve Chair Jerome Powell remains committed to curbing inflation through further rate hikes. The market anticipates continued interest rate increases, with the next FOMC meeting scheduled for May 3, 2023. This data is crucial for cryptocurrency investors since the sector remains closely correlated with the Dow and S&P 500. The Fed faces challenges as major banks predict a sharp U.S. recession in 2023, which could affect risk-on asset prices, including cryptocurrencies. According to a U.S. Bank analysis, investor sentiment regarding the economy is low and trending downward, with inflation, interest rates, and earnings growth uncertainty posing challenges to equity returns.