‘All Bets Are Off’—Crypto Is Now Set for an $8.9 Trillion Earthquake as the Price of Bitcoin, Ethereum, BNB, XRP, Solana, Cardano, and Dogecoin Swing
Bitcoin
Subscribe now to Forbes’ CryptoAsset & Blockchain Advisor and successfully navigating the bitcoin and crypto market crash
The price of bitcoin – after crashing through the first six months of the year when the Fed began raising interest rates – has found a floor in July, climbing around 10% since the beginning of the month. Ethereum, meanwhile, has surged nearly 50% on hype over its planned upgrade builds, helping fellow top ten cryptocurrencies BNB
Now, after leaks revealed a “huge red flag” for bitcoin and crypto exchange Coinbase, the market is braced for the Fed to go “bigger and further” in its fight to fight red-hot inflation as it accelerates the reduction of its $8.9 trillion. balance.
Want to stay ahead of the market and understand the latest crypto news? Sign up for free now CryptoCodex—A daily newsletter for traders, investors and the crypto-curious
Federal Reserve Chairman Jerome Powell walks a tightrope between running inflation and one … [+]
The Federal Reserve’s Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday this week and is expected to raise interest rates by another 75 basis points, following in the footsteps of June’s rate hike.
Earlier this month, in the wake of June’s strong 9.1% consumer price index (CPI), traders had expected the Fed to raise interest rates by as much as one percentage point.
“Financial markets had begun to price in a one percentage point rate hike at this meeting, but Fed officials appear to have played down that prospect,” Russ Mould, chief investment officer at broker AJ Bell, wrote in an emailed comment.
Markets are now pricing in a 70% chance of a 0.75% increase to 2.50% and a 30% chance of a full one-point increase, according to CME Fedwatch data. By the end of 2022, the market places a 90% probability that the Fed Funds rate will reach at least 3.50%, as the US central bank struggles to bring inflation down from its 40-year high of 9.1%.
“But all of this depends on, and even assumes, inflation peaking very soon,” said Greg McBride, financial analyst at Bankrate. MarketWatch. “If not, all bets are off.”
A producer price index (PPI) reading of 11.3% this month, close to the record 11.6% posted in March, “suggests there could be more pain to come,” according to Mould.
The Federal Reserve is also set to accelerate its so-called quantitative easing plan that has already reduced the Fed’s total assets by $66 billion from its peak of $9 trillion, rising to $95 billion per month from September.
“Total Fed assets of $8.9 trillion still mean the central bank’s balance sheet is 8% larger than it was a year ago, 114% larger than it was before the February 2020 pandemic and nearly nine times larger than it was before the Great Recession . the financial crisis of 2007-2009,” Mold added.
Register now for CryptoCodex—A free, daily newsletter for the crypto-curious
Bitcoin price has climbed back above $20,000 per bitcoin this month after crashing below … [+]
Some market watchers and investors fear US inflation is “deeper entrenched” and will need a “bigger and longer” response from the Fed to drive it down.
“My own view is that the Fed funds rate could exceed 4%,” said Joseph Zidle, investment strategist in Blackstone’s private wealth solutions group. Bloomberg. “I think they could go above 4.5%, maybe even closer to 5%.”
After a bruising few months for stocks, bitcoin and cryptocurrencies, some analysts are hoping softer language from the Fed this week could provide some welcome relief.
“If they come in with a 75 basis point hike as we expect, but soften the language on future hikes, that will be a huge boost for the markets next week,” said Luke Tilley, chief economist at Wilmington Trust. Barron’s.
