Market Insight: The Fed Raises Interest Rates To Highest Levels Since 1994, What Impact On Cryptocurrencies?





Bitcoin (BTC) price fluctuated after the Federal Reserve announced further monetary tightening on Wednesday, falling to $20,270 within minutes of the Fed’s statement. But about an hour after the announcement, cryptocurrenciescurrency changed hands at $21,444.

In a much-anticipated decision, the central bank announced that it would raise the fed funds rate, ie the rate at which deposit-taking companies trade deposits held with the central bank, by three-quarters of a percentage point, or 75 basis points.

Fed Chair Jerome Powell said Federal Open Markets Committee members believed the surprise of rising inflation warranted “vigorous action at this meeting” rather than waiting another six weeks for the next FOMC meeting.

“We decided we had to move on, and we did,” Powell said. “We decided we had to move on, and we did.”

The rate hike is the Fed’s largest since 1994 and underscores inflationary pressures on the US economy….

The fed funds rate will be increased within a range of 1.5% to 1.75%. In the long run, committee members expect the benchmark rate to rise to 3.4% this year and in 2023, according to the “dot plot”, a graphical representation of the projections. Fed officials regarding the central bank’s key short-term interest rate, published quarterly.

Bitcoin fell more than 5% after the decision, but recovered during Powell’s press conference, who said the Fed would raise interest rates by a half or three-quarters in each of its next two meetings.

“Markets abhor uncertainty and unpredictability,” said Josh Olszewicz, head of research at Valkyrie. “Digital assets have been significantly correlated with US financial markets in recent months, both of which have continued to fall. A decrease in downside volatility is likely to be achieved only with a pause or reversal of current Fed policy and direction. †

Shares also rose following the Fed’s statement. The S&P 500 rose 2.1% and the Nasdaq 3.3%.

●Bitcoin (BTC): $21,579, -2.53%.

●S&P 500 Daily Close: $3,790, +1.46%.

●Gold: $1835 per troy ounce, +1.39%.

●Daily closing yield on ten-year government bonds: 3.40%

Prices for bitcoin, ether and gold are taken around 4 p.m. New York time. Bitcoin is CoinDesk’s Bitcoin Price Index (XBX); Ether is CoinDesk’s Ether Price Index (ETX); gold is the COMEX spot price. Information on CoinDesk indices is available at coindesk.com/indices.

Tether is seeing another wave of buybacks as fears of market contagion spread.

Tether (USDT) saw $1.6 billion in redemptions in two days. See the article: Can Calyx Token (CLX) compete with top competitors such as Solana (SOL) and Avalanche (AVAX)?† (CoinMarketCap)

In the past 48 hours, investors withdrew about $1.6 billion from Tether’s USDT stablecoin, which is pegged to the dollar, pushing circulating supply down to $70.8 billion, the highest amount, the lowest since last October. years, according to the CoinGecko price tracking system.

Tether’s USDT has a different financial structure than the Terra blockchain’s “algorithmic stablecoin” UST, which collapsed last month. But USDT has long suffered from investor doubts about the assets to support it and whether redemptions will be honored in the event of a widespread crisis.

“Confidence in crypto remains low and some traders fear that Tether could suffer a fate similar to Terra’s stablecoin UST,” said Edward Moya, senior market analyst at Oanda. “Too many institutional crypto investors are going down en masse and they fear that if this part of the crypto ecosystem collapses, Tether will collapse. †

Tether dismisses commercial paper rumors: Tether denies claims that its commercial paper portfolio is 85% backed by Chinese or Asian commercial paper. The company also denied exposure to beleaguered hedge fund Three Arrows Capital and said it had liquidated its position at no loss in cryptocurrency lender Celsius Network. More information here.

All Eyes on Locked Ether: The discount from Locked Ether on Lido (stETH) to Ether (ETH) widened to an all-time high of 8% as major holders including Celsius and Three Arrows Capital may have sold their tokens to meet margin calls . Depeg is concerned about a potential ripple effect in cryptocurrency lending markets. In the short term there will be huge selling pressure, but stETH is not Terra – it is highly unlikely to drop to zero. More information here.

NFT Home Listing Gone Bad: A Manhattan landlord listed his office building as a non-replaceable token on OpenSea two weeks ago. The asking price was $29 million expressed in ether. ETH is down 40% since listing and the price of the building is down $12 million. The owner says the building will be relisted in the coming days to offset the price drop. More information here.

Most of CoinDesk 20’s digital assets ended the day lower.

Thomas Estimbre
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