Will interest rate hikes spell more trouble for crypto markets?

Fears of global recession, stronger dollar, higher interest rates and rise in bond yields are building pressure over the crypto markets.

Since crypto markets move in step with global stock markets, the ongoing volatility in the US markets has also cast a shadow on cryptocurrencies.

All three major indices in the US markets such as the Dow Jones, the NASDAQ Composite and the S&P 500 have fallen in the range of 19 to 30 percent so far this year.

Therefore, the promise of several interest rate hikes proclaimed by the US central bank until 2023 is likely to keep the crypto markets volatile as well.

According to coinmarketcap.com, the global market value of crypto assets has fallen over 57 percent to $935 billion so far this year.

Popular crypto asset Bitcoin, for example, has fallen nearly 60 percent so far in 2022. Other assets such as Ethereum, BNB, Solana, Dogecoin, and Polkadot have fallen in the range of 46 percent to 81 percent over the same period.

Analysts believe that the reduced risk appetite among investors forced them to move to less risky assets such as bonds.

Going forward, they expect volatility in the crypto markets to continue in the short term.

Minal Thukral, Executive Vice President, Growth and Strategy, CoinDCX, says stock selling pressure to cast a shadow. Crypto markets continue to be sideways. Ethereum, Bitcoin are deflationary assets.

On the other hand, independent market expert Devangshu Datta says the lack of any fundamental benchmark makes crypto assets a riskier bet to hold for the long-term horizon.

Devangshu Datta, independent market expert, says Bitcoin’s decline of up to 99% possible. No fundamental benchmark for crypto. Crypto assets are not a safe bet for the long term.

Meanwhile, technical charts suggest a “death cross” pattern for bitcoin, signaling a bearish market ahead.

As for today, investors will be closely watching the Reserve Bank of India’s interest rate stance after the 3-day monetary policy committee meeting.

According to experts, the central bank is likely to raise interest rates up to 50 basis points. FII flows, rupee movements and crude oil prices will also be on investors’ radar.