Krypto acquired a $250 billion earthquake in Bitcoin and Ethereum
02/02 update below. This post was originally published on January 31
BitcoinBTC, ethereum and other major cryptocurrencies have surged higher in the first month of 2023, adding $250 billion to the combined crypto market and topping a surprise Goldman Sachs chart.
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02/02 Update: Bitcoin price rose after the US Federal Reserve followed through on its well-telegraphed quarter-point rate hike, taking the federal funds rate to a range between 4.5% and 4.75%, the highest level since September 2007.
“Overall, the market took it last [Federal Reserve interest rate decision] as dovish, but bitcoin’s rally remains uncertain,” Yuya Hasegawa, crypto market analyst at Tokyo-based Bitbank, said in emailed comments. on the decline. Friday’s jobs report could provide a boost, but with recent declines in weekly initial jobless claims, be too optimistic to have high hopes.”
Bitcoin prices briefly topped $24,000 per bitcoin, a level not seen since August of last year, before falling back as traders bet the slowdown in interest rate hikes will continue through 2023 and could even see the Fed swing to a more dove-like attitude. However, Fed Chair Powell warned that it would be “very premature to declare victory” in the fight against inflation.
“The Fed’s policy is indeed fluid, and they may lean toward pausing rate hikes sooner than they planned, depending on incoming data,” Hasegawa added. But while state inflation is slowing, it remains high and “remains high” as the statement suggests, and Federal Reserve Chairman Jerome Powell indicated the Fed needs significantly more evidence to confidently say inflation is moving closer to its 2% target.”
The bitcoin price rose to around $23,000 per bitcoin, up from under $17,000 at the start of the year. EthereumETH and other top ten cryptocurrencies have seen similar gains – although some smaller coins have risen even higher.
Now the $1 trillion crypto market is gearing up for the latest Federal Reserve interest rate decision tomorrow, which is expected to see the Fed raise the funds rate to a new target range of 4.5% to 4.75% – the smallest increase since it began raising rates in March. last year.
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Markets are “swelling under pressure from the Federal Reserve’s upcoming rate hike,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said in an emailed statement.
The bitcoin price has fallen back from the six-month high it hit last weekend, mirrored by ethereum and other major cryptocurrencies.
“The policymakers are widely expected to raise rates by 25 basis points, and that’s what the market has priced in,” Lund-Yates said. “As the decision approaches, there are inevitably some small tremors creeping in, but these should not be prolonged.”
Rising expectations that the Federal Reserve may withdraw from its policy of rapid interest rate hikes have fueled a crypto and stock market rally through January after economic data showed that red-hot inflation was beginning to ease. The Fed’s series of rate hikes last year were designed to drive down inflation by draining liquidity from the system.
“The market may have gotten ahead of itself for the Fed’s liking,” Nauman Sheikh, head of treasury management at crypto asset manager Wave Financial, said in an emailed statement.
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After tomorrow’s interest rate decision at 2pm ET, Federal Reserve Chairman Jerome Powell will hold a press conference where he is expected to reiterate his hawkish stance.
“The Fed has already laid out its ‘higher for longer’ roadmap where rate hikes will transition from rapid to a more measured pace and then remain anchored to the terminal rate for a while,” Sheikh said.
“The market, now focused on recession, does not believe the Fed and is pricing in interest rate cuts starting in September. There is a strong possibility that Powell at the press conference will be more hawkish and tighten economic conditions again. That is why we could see a healthy short-term correction in crypto and all risk assets.”
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