Despite the Fed’s substantial rate boost on Wednesday in reaction to stubborn inflation, the crypto markets have showed some resilience.
Following the Labor Department’s announcement of US inflation data last Wednesday, the Fed said that it will raise rates by 75 basis points for the first time since 1994. Despite the Fed’s recent aggressive actions and rhetoric, inflation numbers have stayed high.
It’s worth mentioning that the crypto markets have become more closely linked to the US stock market, particularly the Nasdaq’s tech companies. As a result, the crypto markets’ price movement has become increasingly susceptible to US inflation statistics and Fed rate hikes.
While a rate hike of this scale would normally make investors wary of speculative assets like crypto, Fed chair Jerome Powell’s comments that the Fed is unlikely to raise rates by this magnitude in the future appear to have boosted investors’ confidence.
- According to Bloomberg News, Powell remarked, “Today’s 75 basis-point rise is an exceptionally significant one, and I do not expect changes of this size to be regular.”
As a result, the crypto markets are showing signs of life. During the Asian session, Bitcoin and Ethereum gained roughly 6.1 percent and 6.6 percent, respectively, as the overall crypto market cap surpassed $900 billion for the first time.
While these digital assets are still trading in the green in the previous 24 hours at the time of writing, some of the earlier gains have been lost. Bitcoin is up 2.48 percent, trading around $20,566; Ethereum is up 2.13 percent, trading around $1,120; while altcoins such as BNB, ADA, XRP, Solana, and AVAX are up 1.15 percent, 2.53%, 1.18 percent, 1.48 percent, and 4.45 percent, respectively.
It remains to be seen whether the crypto markets can maintain their newfound vigor. However, Galaxy Digital CEO Mike Novogratz feels we are nearing the bottom, putting the price of Bitcoin around $20k and Ethereum at $1k. According to Novogratz, the crypto market will experience spectacular upward swings once the Fed eases its hawkish attitude.
While experts such as veteran trader Peter Brandt feel that the $20k price level should provide significant support for Bitcoin, he also believes that a break below that level may see the commodity tumble below the $13k level.
