Powell strengthens hawkish expectations, pressure on RMB depreciation increases, and Bitcoin follows the US stock market in a “dive”

Affected by the macro situation such as the hawkish interest rate hike by the Federal Reserve and the depreciation of the RMB, the crypto market has suffered another blow. According to Bitpush terminal data, Bitcoin fell below the $40,000 support and was about $39,500 as of press time, a 24-hour drop of 5%. Among the top ten altcoins, Solana (SOL), Cardano (ADA) and Avalanche (AVAX) were the first to bear the brunt, falling 8.12%, 4.87% and 6.09% respectively in the past 24 hours.

According to Coinglass, 70,968 traders were liquidated in the past 24 hours, with a total liquidation of $280.12 million.

The latest correction once again demonstrates Bitcoin’s continued correlation with the stock market.

U.S. stocks came under pressure on Friday, with the Dow Jones Industrial Average and S&P 500 falling for a week, with the Dow falling nearly 700 points, or 1.98%. The S&P 500 fell 2.1%, and the Nasdaq Composite fell 1.88%. These losses brought the Dow's weekly loss to 0.7%, on track for its fourth straight week of losses. The S&P 500 is on track for its third straight week of declines, down 1.7% so far this week.

The decline was partly attributed to hawkish comments from Federal Reserve Chairman Jerome Powell. As previously reported by BitPush, Powell said at an International Monetary Fund panel on Thursday that curbing inflation is "absolutely necessary" and a 50 basis point rate hike in May is on the agenda.

Ross Mayfield, investment strategist at Baird, said in an interview with CNBC: "The central bank's hawkish attitude and the rebound in bond yields are once again dragging down the market. There is nothing particularly new, but it is a reminder that a huge shift is taking place in policy."

That said, traders continue to view Powell’s comments as a risk to cryptocurrencies in the short term and are now closely watching macroeconomic indicators. On the other hand, a weaker Chinese yuan has also heightened risk aversion in global financial markets.

The yuan fell to 6.5050 per dollar, its lowest level since July 2021, and was on track to end the week down 2.5%. That was its biggest weekly percentage drop since August 2015, according to TradingView data.

Jeroen Blokland, founder and head of research at investment research platform True Insights, tweeted: "The Chinese Yuan has weakened rapidly in recent days. The rapid weakening of the Chinese Yuan is a risk-off signal amid lockdowns, slowing GDP growth and a fall in its closest rival, the Yen."

Historically, the depreciation of the RMB has brought huge fluctuations to traditional financial markets. For example, in August 2015, the S&P 500 fell 6.2% to a 10-month low when the RMB depreciated by 2.5%; in the three months ending January 2016, the stock market fluctuated and fell as the pace of RMB depreciation accelerated.

Crypto analyst Omkar Godbole believes that traders will continue to pay close attention to the $40,000 support level, where the trend line connecting the January 22 and February 24 lows may provide strong support around $37,200. The recent high of $43,000 is the level for the bulls to break through, and if the bulls succeed, the price may rise to the $44,000 resistance level.