“Bullish rate hike” – Why crypto surged today in the face of bad news
Cryptocurrency markets have been pumping since the announcement of a 75 basis point interest rate hike in the US, with experts explaining that markets may have initially prepared for much worse.
On July 27, the price of Bitcoin (BTC) rose around 8% to the mid-$22,500s following the decision by the Federal Open Markets Committee (FOMC) to raise interest rates again. Many other top cryptoassets also rose in price, with Ether (ETH), Polkadot (DOT) and Polygon (MATIC) all seeing notable double-digit gains over the past 24 hours.
Quantum Economics founder and CEO Mati Greenspan jokingly asked on Wednesday whether this was a “bullish rate hike” on Twitter.
Speaking to Cointelegraph, Greenspan noted that investors clearly expected worse and suggested that this latest rebuttal is nothing out of the ordinary:
“Markets love going up on Fed days, even when their decision is to be dovish. Powell is particularly adept at delivering bad news. It was clear that investors expected worse.”
The markets expected a larger increase. https://t.co/HkR8Upfi52
— Mati Greenspan (@MatiGreenspan) 27 July 2022
The Fed’s attempt to boost inflation by raising interest rates is usually associated with a pullback in investment activity across markets.
However, there is mixed opinion among the community as to whether the latest pump will have enough momentum to sustain the upside or whether a significant retracement is on the cards before the market starts to fully recover.
Don’t you see that the price is only ranging between 19k and 23k during a downtrend and with no sign of accumulation?
If you want to buy here, go ahead. So don’t regret it and cry if the market makes new lows, which is likely.
I don’t buy.
— il Capo Of Crypto (@CryptoCapo_) 27 July 2022
Pav Hundal, an analyst at Australian crypto exchange Swyftx, told Cointelegraph that the company was “surprised by the exuberant reaction to yesterday’s rate hike”, as the underlying macro landscape remains up in the air:
The Fed says one thing and the markets seem to hear something else every time we see interest rate hikes. In June, it was the Fed who suggested that large interest rate increases would be “unusual”, this time it is Jay Powell who suggests that the increase may “slow”.
“The best gauge of what’s to come is the underlying economic data, and at least for the moment it looks like some inflationary pressures are easing, with gas prices falling in line with futures prices for staples like corn and wheat, as well as some freight costs,” he added .
Related: Ethereum price ‘cup and handle’ pattern suggests potential breakout vs. Bitcoin
Hundal went on to note that Swyftx saw a 100% increase in early trading around the news, indicating that “there are clearly a lot of people who see value in today’s market prices.”
The analyst stressed that a broader bullish or bearish trend is unlikely to become apparent until the US releases key data related to gross domestic product (GDP) developments in the coming days, which could signal whether the country is officially in recession or not. :
“The good news is that we won’t have to wait too long to see what happens to the crypto market once some initial volatility washes out. The US is about to release its GDP data and it’s going to be a big stress test. Any negative sentiment here could wipe out recent gains.”
“However, if the macro landscape begins to show signs of resilience, we could see the crypto market cap stabilize at $1 trillion and increase from there,” he added.
