Crypto Price Check: Fed Rate Hike Spurs Caution Among Traders
Cryptocurrency prices were down as traders reacted to the Federal Reserve’s fourth consecutive interest rate hike.
Bitcoin was flat at $20,281.88 on Nov. 3, according to data firm CoinGecko. Ether, the native currency of the ethereum blockchain, fell slightly to $1,544.79, while dogecoin fell 0.2% to $0.130632.
Stocks also fell on Thursday, extending the declines from yesterday’s post Fed decision.
“The Fed raised rates by 75bps yesterday, as many had predicted and as the market appeared to have priced in,” said Frank Corva, senior digital asset analyst at Finder. “Both traditional and digital asset markets rose following the announcement.”
However, Corva said what markets didn’t like was Federal Reserve Chairman Jerome Powell’s forward guidance.
“Powell said that if the Fed tightens too much, it can use its tools to support the economy later,” he said. “He went on to explain how he feels overtightening is a better risk than not tightening enough, which could cause inflation to stick.”
“Powell on a Mission”
Corva said Powell also stated that the terminal Fed Funds rate will be higher than previously expected “and that the Fed expects to stay the course until the job of bringing down inflation is done.”
“After receiving this message, just about every market — from bonds to stocks to crypto — started falling,” he said. “Essentially, Powell has made it clear that he plans to tighten until either inflation falls or something breaks.”
“This is not good news for markets, especially markets for risk assets like tech stocks and crypto,” Corva added. “Powell is on a mission to bring down inflation, and the well-being of the financial markets appears to be a secondary concern for him at best right now.”
Edward Moya, senior market analyst for the Americas with Oanda, said a hawkish Fed is triggering a moment of less risk on Wall Street, but Bitcoin is refusing to give up the psychological $20,000 level important to crypto traders, or “hodlers.” as they are also known.
“Stocks are down significantly after feeding, but Bitcoin continues to hover above $20,000,” Moya said. “Bitcoin may eventually break here, but this resilience on display should show the markets how confident long-term hodlers remain.”
Moya said stocks aren’t going to die a painful death here, “but they will soften until the market is priced in a little more Fed hawkishness.”
Hong Kong’s Crypto Rule
Meanwhile, CloudTree Ventures managing partner Winston Ma said crypto trading in Asia got a boost from the Hong Kong government’s proposed rule to potentially allow retail investors to trade cryptocurrencies and crypto exchange-traded funds.
Financial Secretary Paul Chan said in a keynote speech delivered to the Hong Kong Fintech Week conference on Monday that The authorities will start a consultation process aimed at giving retail investors “an appropriate degree of access” to virtual assets, Ma said.
“The city, which previously proposed restricting crypto trading to professional investors, has seen planned digital asset regulations heavily criticized for stifling innovation,” said Ma, author of “Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse .” “The HK government is likely hoping that the new move towards legalizing retail investors’ crypto trading will help it rebuild its fintech hub status.”
He said the latest announcement could bring Hong Kong’s rules in line with Singapore’s.
“It will be interesting to see how the future competition between HK and the government will play out, for crypto talent and investment capital,” Ma said.
