Crypto prices are steadying following the latest interest-rate hike from the Fed.
Dreamstime
Bitcoin
and other digital assets were mixed on Thursday as cryptocurrency traders—like their counterparts in the stock market—digested the latest monetary policy decision from the Federal Reserve.
The price of Bitcoin was largely unchanged over the past 24 hours at around $19,100. While the largest crypto has left behind its recent bottom below $18,500—reached in a deep selloff Monday—Bitcoin remains outside of the $20,000 to $25,000 range in which it has largely traded since a mid-June rout knocked it down from $30,000.
Macro pressures continue to dominate the market, with the focus being on Wednesday’s Fed’s decision to raise interest rates by a supersize 75 basis points, or three-quarters of a percentage point, for the third time since June.
While the hike was in line with market expectations, sentiment has been dampened by signals that the Fed will remain resolute in its mission to tame inflation at a multidecade high and that rates may go higher for longer, raising the risk of recession.
Cryptos should in theory trade independently of mainstream finance, but have shown themselves to be correlated to other risk-sensitive assets like stocks, and similarly vulnerable to shifts in the macro picture. The Fed’s aggressive shift in tightening financial conditions has seen digital assets suffer steep losses in 2022 alongside deep declines in the Dow Jones Industrial Average and S&P 500.
“The rate hike was priced in, but the markets were holding out hope that the Fed would be ready to soften its strategy,” said Michael Safai, managing partner at crypto trading firm Dexterity Capital. “Once investors digest the news, crypto prices will stabilize in a rangebound pattern again. But, it’s clear that the Fed and inflation data will continue to shape the direction of crypto markets.”
According to Safai, crypto is likely to remain volatile around the latest releases of inflation data and Fed decisions, but otherwise there are few catalysts likely to spark a surge in trading volumes or big price swings.
“The more active investors will return to strategies that do well in a rangebound market and eye the next round of [inflation] data with the hope that something will shift,” said Safai. “The next couple of months will test investor patience. There will be no easy triple-digit gains to be had. There’s still money to be made in the markets, but it will come down to quick thinking and even fast execution.”
Beyond Bitcoin, Ether
—the second-largest digital asset—fell 4% to below $1,300. Smaller cryptos, or altcoins, were generally a bit higher, with both Solana
and Cardano
up 1%. Memecoins, initially intended as internet jokes, were also in the green, with Dogecoin
rising 1% and Shiba Inu advancing 2%.
XRP, the token of the Ripple network, jumped 7%, taking its rise since last week to almost 30%. Ripple was sued by the Securities and Exchange Commission (SEC) in 2020, with the agency alleging that the company improperly sold the token tied to the company. Both the SEC and Ripple filed summary judgment motions last weekend in a bid to avoid a full trial.
Write to Jack Denton at jack.denton@dowjones.com