The crypto market has been in a significant decline since Friday afternoon, as concerns over the Ukraine issue and the rise in inflation prevail. 

As we can see in the hourly chart showing the total capitalization of cryptocurrencies, the support level (yellow line) could not hold the price. Prices have moved down, while the effort of the last few hours to recover does not seem to come anytime soon.

Another observation we can make about the chart is that the correlation of crypto with the Nasdaq technology index (blue line) has returned. Investors are abandoning cryptocurrencies and stocks for safer shelters, such as bonds.

• The biggest losses from the main cryptocurrencies were recorded by Solana, which in the last hours has fallen 13%. 

Observing the following 4-hour chart, we find that the support (yellow line) could not withstand, with the result that its price collapsed at $ 93.

The reasons for the retreat

The reason why the upward movement of the last two weeks has stopped is that the general investment climate has worsened after the White House warned that Russia could invade Ukraine in the coming days.

However, it is not only the Ukrainian crisis that has created nervousness in the markets but also the announcement on Thursday that inflation will rise beyond expectations. From there, the correction started, not only in the cryptocurrency market but also in the shares. Many feared that the Fed would further toughen its stance on trying to drain the system of excess liquidity. Goldman Sachs has already forecast extreme increases in interest rates in the US economy by 175 basis points and 7 times in 2022.

However, the problem for those responsible for monetary policy-making is that the limits of action are limited. If they react aggressively by raising interest rates sharply, it is very likely that we will see massive sales in the markets and this is a possibility that they do not want for any reason. Also, a deterrent would be a possible conflict in Ukraine, as it would push fuel prices to soar and disrupt the supply chain.

This is a vicious circle. If they raise interest rates, they risk a recession and a stock market collapse in the end. If they are forced to continue with mild interventions, inflation will remain high. The last possibility is the favorable scenario for Bitcoin, as it will highlight the feature that attracted Wall Street from the beginning: its rarity.