Bitcoin (BTC) had a wild ride on Thursday.
The BTC/USDT pair hit an eight-month high of $25,250 before hitting a sharp correction, eventually sending the crypto asset benchmark all the way back to $23,500.
As seems to be the case lately, traders are heavily invested in what the macroeconomic calendar has to tell us.
In this case, a persistently tight US labor market and inflationary producer prices have strengthened the hawkish case for a longer rate hike cycle, which spells bad news for risk assets.
Federal Reserve officials Loretta Mester and James Bullard were particularly hawkish in their comments, with the former advocating another hike above 5% and keeping it there “for a while.”
It’s worth noting that neither Mester nor Bullard has a seat on the Federal Open Market Committee (FOMC), which actually sets prices — not that traders were paying attention.
Bitcoin (BTC) pulls back from eight-month highs – Source: currency.com
Coinciding with BTC’s reversal, the S&P 500 fell 1.7% while US tech stocks fell around 2.5%. The Nasdaq-listed crypto exchange Coinbase, which was broken this week, also made a sharp U-turn.
There are two things to take away here. A) the markets are not as averse to the Fed hawks as previously imagined, and B) with all this short-term volatility, it pays to look at the bigger picture.
A worst-case scenario could be argued for the USD 21,300 support line, which is where BTC/USDT was positioned before last year’s FTX implosion in November, and also where the pair bounced off after finding support earlier this month.
More optimistic investors will be counting on BTC/USDT to stay within the channel between USD 22,500 and USD 23,500, and in fairness to that scenario, the Binance order book is showing a good deal of buyer support at the upper end of this range.
The FOMC minutes are due next Wednesday; they will be the ones to watch closely.
Ethereum (ETH) hit an intraday high of $1,740 yesterday before ending the session 6% lower at around $1,640. The ETH/USDT pair has since recovered above USD 1,655.
Speaking of ETH, recent data shows that total ETH supply on exchanges has dropped 37% since the Merge protocol upgrade last September.
This suggests that more ETH holders are keeping their coins offline. Combined with deflationary post-merger tokenomics, this could spell bullish news for the world’s second largest cryptocurrency.
Not that we’ve seen the fruits of this dynamic yet – the ETH/BTC pair is down around 3.2% so far this year.
Altcoins turn red
The market-weighted CoinDesk Market Index fell 2.7% overnight, with losses piling up in response to these hawkish economic data releases.
Losses were fairly uniform among the majors, with BNB, Ripple (XRP), Cardano (ADA), Dogecoin (DOGE), and Solana (SOL) shedding low single digits from their respective market caps.
Polygon (MATIC) bucked the trend by continuing to rise, as it has for the past four days.
MATIC is currently trading hands at a 10-month high of $1.47, helped in part by the Valentine’s Day announcement of the zero-knowledge Ethereum Virtual Machine (zkEVM) beta launch, scheduled for March 27.
zkEVM intends to make Polygon’s Ethereum scaling solution faster and cheaper.
Top daily risers among the top-100 set include Filecoin (FIL), Rocket Pool (RPL) and MAGIC, while top daily losers include Aptos (APT), Render Token (RNDR) and Frax Share (FXS).
Global cryptocurrency market capitalization is currently $1.08 billion, while total value locked (TVL) across all decentralized finance (DeFi) protocols fell 3% to $49 billion overnight.
