The Effects of Brent Oil & Interest Rates on Crypto

The recent uptrend in Brent Oil literally spoiled the plans of central banks. While Brent Oil was traded around $72, the expectations from the Federal Reserve (FED) and the European Central Bank (ECB) were much more positive. The markets were buying the hope that the interest rates will be stable until Q1 of 2024, then the rates will gradually go lower through the second half of the year.

Well, this plan sounds pretty good but the only problem is that it does not consider the external factors (price of commodities, , oil, global risks etc.,) and the vulnerability of the plan was another risk factor in the markets. Eventually, the worst-case scenario is taking place.

Let's see the relationship and effects of Brent Oil and Interest Rates on crypto

Rise of Brent Oil

First of all, there is a direct connection between the price of oil and the performance of markets such as stocks and crypto. Though both markets have been in turbulence, it has been happening not because of the price of oil but the interest rates and Quantitative Tightening.

Brent Oil found strong support from the 200-week moving average as expected. Now, it targets $100+ levels as the winter approaches.

How does it affect crypto?

Actually, there is such a connection.

When the price of Brent Oil rises, it triggers higher inflation rates.
When inflation goes up, central banks increase the interest rates to cool down economies.
At the same time, central banks take out money from the markets which is called Quantitative Tightening.

So, increasing interest rates + Quantitative Tightening = no volume and sell pressure in markets.

When the world is not happy and greedy, such markets as crypto cannot perform well.

Interest Rates & QT

This is the weekly data that I got from Yardeni

The curve at the top which is around between early and mid 2022 was the highest amount of dollars in the markets. Then, we had lots of (literally lots of) interest rate hikes while taking money out of markets at the same time.

The killer shot of interest rates is not because it serves a good return for your dollar, but because it increases the cost of loans, lowers the demand and forces people to keep money away from risky investments.

While we are seeing all these things, I cannot be positive for crypto ecosystem in the medium term. Yeah, we will go lower, this is what I expect but I also believe that we will reach a saturation point where no more sellers will be available but the volume will also be terribly low at the same time.

As my expectation is another leg of trouble, I refrain from putting more money in crypto. I have a list of coins to carry with me in the bull run and I make some purchases slowly but firmly as the market goes lower.

There is no rush for crypto. So, it is time for buyers to determine the price of a coin.

For example, I started to dollar cost average RNDR from $1.9

I would NEVER expect RNDR to lose so much value to test $1.30+ but it happened. Lower lows are pretty likely in the current state of crypto. Just use some Technical Analysis and combine with Fundamental Analysis to set your levels to average your cost in crypto purchases if you want to take positions.

I feel that we have long time to average our costs while the global factors are desperately negative.

What is your expectation from Brent Oil's Rise and Interest Rates on our market?
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Hive On ✌🏼

Posted Using LeoFinance Alpha