Bitcoin, Ethereum, Dogecoin Plunge: More Pain Ahead Or Will 'FUD Like This' Cause A Crypto Spike Soon?

Bitcoin and other major coins tumbled Thursday evening as the global cryptocurrency market cap dropped 7.2% to $1.7 trillion at press time.

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Why It Matters: Risk assets such as stocks and cryptocurrencies dropped lower after a selloff ensued. The S&P 500 and Nasdaq closed 3.6% and 5% lower, respectively, on Thursday. At press time, U.S. stock futures were little changed.

The dollar index, a measure of the greenback’s strength against six other currencies, touched 103.94 on Thursday — its highest level since December 2002, according to a Reuters report. 

After action on interest rates from the U.S. Federal Reserve, the Bank of England raised interest rates by 25 bps. The move was construed as dovish by Giles Coghlan, chief analyst at HYCM.

“With inflation sitting at a 30-year high of 7%, today’s dovish hike is a sign that policymakers are now entering increasingly choppy waters when it comes controlling the inflation narrative,” said Coghlan, in a note seen by Benzinga. 

“Generally speaking, the BoE does not want to see inflation entering strongly into wages. Once it does, the issue becomes systemic and generates a force of its own, which becomes exceedingly difficult to control,” said Coghlan.

Chartist Ali Martinez said that Bitcoin broke through a support level at $38,670, where 2 million addresses hold over 1 million BTC. 

Bitcoin “needs to reclaim $38,670 as support quickly to avoid these addresses from selling some of their holdings as the next key support sits at $28,500,” said Martinez.

Data shows that #Bitcoin broke through a crucial support level at $38,670 where 2 million addresses hold over 1 million $BTC. #BTC needs to reclaim $38,670 as support quickly to avoid these addresses from selling some of their holdings as the next key support sits at $28,500. pic.twitter.com/YwnfbdyNt1

— Ali Martinez (@ali_charts) May 5, 2022

Cryptocurrency trader Michaël van de Poppe said if Bitcoin wants to be bullish it needs to reclaim the $37,500 level. 

“​​Under $37.5K, nothing to say about bullish perspectives,” said the analyst. 

If #Bitcoin wants anything to be bullish, it needs to reclaim the level at $37.5K.

Then I'm assuming we'll test $39K again as there's a big gap in between.

Under $37.5K, nothing to say about bullish perspectives. pic.twitter.com/KTXPdC6XBX

— Michaël van de Poppe (@CryptoMichNL) May 5, 2022

On the derivatives side, over 26,500 BTC worth of open interest was added to the market, but during the sell-off on Thursday most of this open interest amounting to 25,000 BTC has been closed, according to a tweet from Glassnode. 

#Bitcoin Futures markets have seen a whirlwind 24hrs following Fed rate hikes yesterday.

Over 26.5k $BTC worth of open interest was added to the market during yesterdays rally.

However during the sell-off today, almost all of this open interest (~25k $BTC) has been closed out. pic.twitter.com/2yytI5wHIw

— glassnode (@glassnode) May 5, 2022

Market data platform Santiment said traders appeared to believe that Thursday’s cryptocurrency spike was an anomaly.

“Historically, when calls for #selling spikes, crowd [fear, uncertainty, and doubt or FUD] like this strengthens the case of a continued rise," Santiment said.

#Crypto traders appear to believe that yesterday's market-wide price surge was an anomaly, and the short celebration won't last. Historically, when calls for #selling spikes, crowd #FUD like this strengthens the case of a continued rise. https://t.co/o8gp8VqBn8 pic.twitter.com/s59c5USnMS

— Santiment (@santimentfeed) May 5, 2022

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