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Crypto Week: European Banks' Blunders Are Adding Pressure on Cryptos

Bitcoin prices are moving sideways amid a lack of significant directional drivers in the crypto and  traditional financial markets. The overall negative picture which has been painted with a bearish trend is intact and Bitcoin prices may plunge to $15,000 per coin in the foreseeable future.

A possible Credit Suisse meltdown may put enormous pressure on digital assets as institutions are likely to firstly dump risky assets in the case of severe financial troubles. Credit Suisse stocks have fallen by 20% over the last two weeks, and by 60% from the beginning of 2022. The major reason is the loss of four billion Suisse francs during the last three quarters. Analysts are more apocalyptic regarding the next Q3 2022 earnings report that is expected to be released on October 27. Credit Suisse CDS (credit default swaps) surged above 250 points, a record high since 2009. Archegos Capital and Citrix cloud computing company largely contributed to the financial deterioration of Credit Suisse.

However, it is not the only European bank to suffer from worsening financial conditions. Shares of Deutsche bank fell sharply after the North Stream 1 and 2 pipelines blasts and the fears that manifested from this about a possible recession in the German economy. The situation concerning large financial institutions would certainly impact European and global financial markets. Long-lasting quantitative easing policies implemented by major central banks led to a relaxed financial policy of large financial institutions that had access to cheap funds that allowed them to increase debt. Now they are struggling to refinance the debt amid rapid interest rate hikes. At the moment there are no reasons for panic as central banks like Swiss National Bank are likely to support troubled large financial institutions. But further risks of a mortgage crisis due to rising interest rates may weaken the entire financial system.

Something of that sort happened in 2018 when the Federal Reserve (Fed) and the European Central Bank (ECB) were trying to curtail their QE programs and tighten monetary policies. Bitcoin prices reacted with a decline by 60% or by $6,000 by summertime and continued to drop, reaching $3,000 in November. Now the situation looks similar and further rapid deterioration of the crypto market should not be excluded. Bitcoin may reach $8,000 during the current downside correction.

Some digital assets have already lost more than 80% during this crypto winter. Coins like SOL, DOT and AVAX are the bright examples of such drops amid weakening major cryptocurrencies. Ethereum seems to be much stronger, but in the current financial circumstances it is rather a question of time as ETH may perform a larger downside swing. BTC is now trading close to the lows of mid-2021, while ETH prices are 25% above those lows. Even the second largest digital currency has no abilities to resist the overall market correction for a long time. ETH prices may drop to $700 per coin.