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Crypto prices are stabilizing after the latest interest rate hike from the Fed.
Dreamstime
Bitcoin
and other digital assets were mixed on Thursday as cryptocurrency traders – like their stock market counterparts – digested the latest monetary policy decision from the Federal Reserve.
The price of Bitcoin was largely unchanged over the past 24 hours at around $19,100. While the biggest crypto has left behind its most recent bottom below $18,500 – reached in a deep sell-off on Monday – Bitcoin remains outside the $20,000 to $25,000 range where it has largely traded since a mid-June rout knocked it down from $30,000.
Macro pressure continues to dominate the market, with the focus on Wednesday’s Fed’s decision to raise interest rates by a whopping 75 basis points, or three-quarters of a percentage point, for the third time since June.
Although the rise was in line with market expectations, sentiment has been dampened by signals that the Fed will remain resolute in its mission to tame inflation to a multi-decade high and that interest rates may stay higher for longer, raising the risk of a recession.
In theory, cryptos should act independently of ordinary finance, but have been shown to be correlated with other risk-sensitive assets such as shares, and similarly vulnerable to changes in the macro picture. The Fed’s aggressive shift in tightening financial conditions has seen digital assets suffer heavy losses in 2022 along with deep falls in
Dow Jones Industrial Average
and
S&P 500.
“The rate hike was priced in, but markets held out hope that the Fed would be ready to soften its strategy,” said Michael Safai, managing partner at crypto trading firm Dexterity Capital. “As investors digest the news, crypto prices will stabilize in a bounded pattern again. But it’s clear that the Fed and inflation data will continue to shape the direction of the crypto markets.”
According to Safai, crypto is likely to remain volatile around the latest inflation data releases and Fed decisions, but otherwise there are few catalysts likely to trigger an increase in trading volume or large price swings.
“The more active investors will return to strategies that do well in a limited market and see the next round off [inflation] data with the hope that something will change,” said Safai. “The next couple of months will test investor patience. There will be no easy triple-digit gains to be made. There is still money to be made in the markets, but there will be down to quick thinking and even quick execution.”
Beyond Bitcoin,
Ether
— the second largest digital asset — fell 4% to below $1,300. Smaller cryptos, or altcoins, were generally slightly higher, with both
Solana
and
Cardano
up 1%. Memecoins, originally intended as internet jokes, were also in the green, with
Dogecoin
rises 1% and
Shiba Inu
increases by 2%.
XRP,
the symbol of the Ripple network, jumped 7%, taking the rise since last week to almost 30%. Ripple was sued by the Securities and Exchange Commission (SEC) in 2020, with the agency alleging that the company improperly sold the token associated with the company. Both the SEC and Ripple filed motions for summary judgment last weekend in an attempt to avoid a full trial.
Write to Jack Denton at [email protected]
