Crypto Assets Facing Technical Challenges and Uncertainty

The crypto market has been experiencing downward pressure since hitting a peak last month, when investors turned to crypto assets due to concerns about banking and monetary policy expectations. However, fears of a recession in the US and further interest rate hikes in Europe could affect the market, eroding investors’ confidence and willingness to take risks.

Moreover, bitcoin prices have been impacted by significant congestion and skyrocketing transaction fees, leading to the temporary suspension of bitcoin withdrawals at the world’s largest crypto exchange. Such network issues and infrastructure disruptions could limit institutional investors’ confidence in the asset and restrict inflows in the future.

As a result, other cryptocurrencies, particularly stablecoins, have benefited from bitcoin’s retreat. Ethereum, the second-largest cryptocurrency, has also seen some improvement in market share despite recording a loss, which remains smaller than that of other cryptos.

Nevertheless, the potential for a softer monetary policy in the US could support crypto assets in general. The Federal Reserve is expected to halt its interest rate hikes and potentially decrease them later this year. This trend could encourage investors to take more risks, potentially fueling a more positive outlook for crypto markets.

Furthermore, US banking concerns could favor a stronger bitcoin, particularly if new issues arise after the Federal Reserve raised interest rates again last week. This move could put more pressure on US regional banks and other institutions disproportionately exposed to interest rate risks.