Bitcoin Tests Near 2-Year Low; Ether expands the slide after merging
Cryptocurrencies battled declines triggered by another big rate hike by the Federal Reserve, although sentiment remained cautious given the central bank’s warning of economic pain ahead from policy tightening.
Bitcoin, the largest token, was about 1.2 percent higher at 10:50 a.m. in London on Thursday after earlier falling as much as 4 percent against levels last seen in 2020. Second-largest coin Ether continued to underperform, shedding 2 percent. cents.
Markets are reeling from the Fed’s determination to fight inflation by tightening monetary conditions. Shorter-maturity Treasury yields jumped more than longer-tenor yields, deepening an inversion in bond curves seen as a signal of recession. A dollar gauge was at a record high as investors sought a hole.
Such a backdrop leaves little breathing room for crypto markets. They were already on a $2 trillion drop from a record high in 2021, an unrecoverable pock market with explosions like the Three Arrows Capital hedge fund and the Terraform Labs project – whose co-founder Do Kwon is wanted by the authorities.
“If the Fed continues to tighten, unless it implements yield curve control to keep the curve positively sloping, the cryptosystem will see many more failures,” said Brian Pellegrini, founder of Intertemporal Economics. “At the end, a few very rich champions will emerge, but in the meantime, there will be blood in the streets.”
The MVIS CryptoCompare Digital Assets 100 index is down this week, taking losses for 2022 to around 60 percent compared to 23 percent for global stocks. The correlation between stocks and Bitcoin is elevated and near record highs, a sign of how assets are being thrown around by common macro factors.
‘PONZI SCHEMES’
JPMorgan Chase & Co. CEO Jamie Dimon didn’t help the mood in digital asset markets by confirming his skepticism, calling tokens “decentralized Ponzi schemes.”
Bitcoin was around $19,158 and Ether $1,288. Ether continues to take another hit as a previous rally sparked by hype surrounding the Ethereum network upgrade winds down. Coins like Solana and Avalanche were up.
Some traders may look to measures such as Bitcoin’s 14-day relative strength index to confirm that a bounce is possible. The RSI, a momentum gauge, is near oversold levels. But contrarian bets appeared few and far between for riskier assets after the Fed’s lackluster performance.
