Cryptos Fall As Markets Digest Rising Interest Rates, Forward Guidance

Crypto markets remained subdued early Friday as investors weighed the impact of interest rate hikes announced by the Federal Reserve and the Bank of England.

Both central banks raised rates by a quarter of a percentage point each, and along the planned lines. However, the Fed’s dovish action and a concurrent hawkish stance spooked investor sentiment as markets grapple with the prospect of six more rate hikes in the current fiscal year. The lack of progress in ceasefire talks between Russia and Ukraine also dampened investor confidence.

Markets also priced in the rebound in the dollar after the correction in previous sessions. The Dollar Index is currently at 98.54, having gained significantly from Thursday’s 97.96 level.

The crypto market capitalization fell nearly one percent to $1.82 trillion. Bitcoin dominance fell to 42.3% while Ethereum surged to 18.5%.

Bitcoin is trading at $40,536.24, down 1.05% in the past 24 hours. Google Trends search data shows “Bitcoin” searches fell to a six-month low of 30 in February from 100 in mid-May, providing insights into behavioral dynamics in the context of a period turbulent in the history of the main cryptocurrency.

Ethereum is trading at $2,806.06, down slightly by 0.17% amid huge expectations for the arrival of Ethereum 2.0. Meanwhile, Ethereum co-founder Joe Lubin reiterated his expectation that the next era of Ethereum will occur within the next 6 months.

All of the top 10 cryptocurrencies except Terra (LUNA), ranked 7th, were able to record gains on a weekly basis. Terra is down more than 5% on an overnight basis and 13% on a weekly basis.

According to data published by which tracks 261 yield-earning assets, the staked value of Terra (Luna) is $26.45 billion, below the $33.02 billion attributed to the first Solana (SOL) and $26.62 billion because of Ethereum 2.0. Terra’s staked value rose from $31.7 billion on March 11, while Solana (SOL) improved from its previous level of $32.1 billion and Ethereum 2.0 rose from $25.1 billion.

Apecoin (APE), the new token from the popular Bored Ape Yacht Club NFT project has climbed to 33rd among all cryptocurrencies and 14th among all crypto tokens after prices surged around 100% over the past last 24 hours. The cumulative gains on the token that was launched on March 17 exceed 1300%.

With a circulating supply of 0.28 billion and a market capitalization of $4.11 billion, the ERC-20 token used in the Bored Ape NFT ecosystem is now ranked as the most valuable cryptocurrency in the Entertainment category. . Based on market capitalization, it is also now ranked the second most valuable cryptocurrency in the Collectibles & NFT, Metaverse, Content Creation, Gaming, DAO, and Governance categories.

In legal news, Coinbase Global Inc, Coinbase Inc and Coinbase Global CEO Brian Armstrong have been named defendants in a class action lawsuit that claims the Nasdaq-listed exchange acted as a broker-dealer without sharing the necessary. risks involved in trading up to 79 different tokens. According to the plaintiffs, Coinbase is liable as a brokerage firm and “actual seller” when the exchange takes place, crediting and debiting the parties involved in the transaction to its accounts, rather than facilitating the direct exchange between those parties. Plaintiffs are represented by Connecticut law firm Silver Golub & Teitell.

The last time the Fed raised interest rates was on December 20, 2018, when after raising the federal funds rate to 2.50%, the Fed promised to stop raising rates. At that time, Bitcoin was trading around $3,250 and commanding a market capitalization of $57 billion.

On March 3, 2020, when the federal funds rate was cut from 0.50% to 1.25% due to the coronavirus pandemic, Bitcoin had risen to $8,560 while the market cap soared to around $156 billion. When on April 29, 2020, the Fed Funds rate was further lowered to 0.25%, Bitcoin had fallen to nearly $7,670 and the market capitalization to $140 billion.

On March 15, 2022, a day before the Fed hiked rates to 0.50%, Bitcoin was trading above $39,000, with a market capitalization of $747 billion.

Between March 2020 and March 2022, the Fed’s balance sheet grew from $4.31 trillion to $8.91 trillion. The FOMC’s January press release indicated that it planned to start reducing the size of the Federal Reserve’s balance sheet after the process of increasing the target range for the federal funds rate began. The final word on this is that the Committee plans to begin reducing its holdings of Treasury securities, agency debt and agency mortgage-backed securities at an upcoming meeting.

Quantitative easing carried out to increase the money supply and stimulate economic growth would have found its way to various asset classes. The balance sheet reduction aims to reverse the effect of the loosening of liquidity, given the profound impact it has had on inflation.

Tracking the Fed’s balance sheet reduction program could give some insight into how liquidity and asset valuations will evolve in the days ahead. All asset classes should invariably take notice of this repositioning. Cryptocurrencies are no exception.

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