and other cryptocurrencies on Wednesday along with other risky assets after The Federal Reserve raised interest rates by a quarter point.
It’s another rate hike, but a marked slowdown in the pace of tightening in financial conditions after a series of larger hikes in the past year. The Fed also reiterated its prediction that it will raise interest rates at least twice.
Markets rallied during Fed Chair Jerome Powell’s question-and-answer session with reporters, in which he noted that inflation so far has fallen rapidly and that The decision to raise interest rates further It will depend on the incoming economic data.
Bitcoin price is up around 1.5% in the past 24 hours and is hovering around $23,400. The largest digital asset It rose higher to start the year, up 40% as cryptocurrencies benefited from improving investor risk appetite. While bitcoin is still at a third of its late 2021 high, traders are becoming increasingly optimistic about it The bottom of the brutal bear market Already hit him – on the heels Shock bankruptcy of FTX November – and cryptocurrencies are poised to rally.
“Cryptocurrency fundamentals are declining here and the primary driver is the overall appetite for risky assets,” said Edward Moya, analyst at broker Oanda. “Bitcoin seems to have massive resistance at $24,000, so if the rally stalls after the massive Fed and technical earnings fireworks, a consolidation could happen again towards $20,000.”
In fact, Wednesday’s earnings from
(Stock ticker: META) – and peers
(AMZN) THURSDAY – Sentiment towards tech will hit, likely leak into cryptocurrency.
But the spotlight is on the Fed. Decades-high inflation and rising interest rates have been major headwinds for Bitcoin over the past year, as digital currencies have become more correlated with stocks on an unfavorable macro backdrop for risk-sensitive assets. Investors hope the worst is over.
In its statement accompanying the rate hike, the Fed kept language that it expected “continued increases” in the target range for the federal funds rate. The statement removed some language suggesting that the COVID-19 pandemic and events in Ukraine were contributing to inflationary pressure.
During his remarks to reporters, Powell said decisively that he believes markets are already reflecting tighter financial conditions. He attributed market interest rate expectations, which are more pessimistic than those of Federal Reserve officials, to investors’ more optimistic view of how quickly inflation will fall.
For digital tokens and other risky assets, that added to a significant rally as Powell spoke. beyond bitcoin, ether– the second largest cryptocurrency – up nearly 2% in the last 24 hours to $1,619.50. smaller icons Cardano And ribbed It rose 5% and 10%, respectively, after the Fed’s release, after being lower the day before.
The recent rally in cryptocurrencies It pretty much looks like it’s built on sand, with striking jumps in Bitcoin fueled by lower liquidity and technical factors including a short squeeze driving prices higher – not organic demand. Those same trends helped drive up prices It can speed up a deep sell.
Write to Jack Denton at [email protected]
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