Market Wrap: Bitcoin Declines on Fed Rate Projection

Cryptocurrencies were mostly lower on Wednesday, despite a brief 3% spike in Bitcoin after the US Federal Reserve maintain expansionary monetary policy.

The gains were short-lived, however, as risk assets fell, with traders focusing on Fed officials’ revised forecast for rate hikes through late 2023 – earlier than expected in March.

Current prices

  • Bitcoin (BTC) $ 38,577.3, -2.71%
  • ether (ETH) $ 2,415.5, -4.05%
  • S&P 500: 4223.76, -0.54%
  • Gold: $ 1,826.61 – 1.7%
  • 10-year government bond yield: 1.554%

The Fed also raised its estimates of upcoming inflation to 3% from 2.2% in March, largely due to temporary factors.

“The updated economic forecasts still support the argument that the Fed might announce a progress-based tapering plan at the end of the summer, with actual reductions beginning in January,” wrote Edward Moya, senior market analyst at Oanda, in an e-mail. Mail to CoinDesk.

Moya expects risk assets, including cryptocurrencies, to come under short-term pressure amid worrying signs of inflation. Rising prices could lead to the Fed tightening earlier than expected.

The S&P 500 and gold, copper and platinum prices fell as 10-year US Treasury yields surged above 1.5%.

Regulatory developments

Traders struggled more than Fed expectations for an earlier rate hike. The crypto markets continue to face pressure from regulators, and this doesn’t just apply to China.

Members of the US House of Representatives have become one Task Force to discuss a range of crypto-related topics with the aim of “working with regulators and experts to delve deeply into this poorly understood and minimally regulated industry,” said MP Maxine Waters (D-Calif.), Chair of the House Financial Committee for Services.

And in South Korea the exchange took place Trading stopped on certain cryptocurrencies as regulatory pressures increase. The latest move follows an ongoing regulatory crackdown on crypto trading, including Fines Imposed on exchange employees caught trading on their own platforms.

Regulatory raids could weigh on crypto prices and keep financial advisors on the sidelines.

In fact, over 90% of all are independent financial advisors questioned from Opinium would not recommend investing in crypto or meme stocks.

At the moment traders continue to make long / short bets; On the one hand, balance out the regulatory uncertainty and, on the other hand, be prepared for an accommodating macroeconomic environment that has rewarded risky assets in recent years.

Increased insurance costs

On the bitcoin options market, Hedging costs continues to rise, suggesting that the fear caused by the May sell-off may not have completely dissipated.

The graphic below shows the three-month Bitcoin option premiums for put contracts with an exercise price of 80% of the spot price, based on the data provided by Skew. The current level of protection is still higher than the May low, which preceded a price sell-off of nearly 30%.

The following graphic shows the 3-month Bitcoin option premiums for put contracts with an exercise price of 80% of the spot price.
Source: Crookedness

A similar dynamic can be seen in the one-week put-call skew, which measures the spread between the prices of short-term puts and calls. The put-call skew has drifted from a high of almost 20% in May, but remains elevated compared to the previous months.

Option data suggests that traders are not overly complacent in the absence of a critical price breakout from a month-long range.

The chart shows a week-long put-call skew that measures the spread between the prices of short-term puts and calls.
Source: Crookedness

Bitcoin hashrate decrease

Bitcoin hashrate – all of the computing power used to secure transactions on the blockchain – has dropped to its lowest level since November, possibly a reflection of China’s recent crackdown on cryptocurrency mining amid concerns about the network’s energy consumption.

The seven-day average hashrate slipped to 129.1 million exahashes per second on Tuesday, well below the all-time high of 180.6 million exahashes per second in mid-May, according to data from Glass knot. It’s still up from 105.6 million a year ago.

Bitcoin hashrate has dropped to its lowest level since November.
Source: Glass knot

However, some analysts predict that the decline in the Bitcoin hashrate will eventually reverse as some miners leave China for other locations.

“When you zoom out, the size and rate of the most recent decline is consistent with other prior declines,” wrote Zack Voell, content director at Compass Mining. “After the machines have shuffled around on the map and the hash power has shifted to new regions, the steady growth of Bitcoin’s hashrate should be resumed.”

Altcoin summary

  • Banks could one day be important participants in Ethereum 2.0, such as companies like Blockdaemon and Bison Trails. However, there are still decentralized staking pools need a head start on Ethereum 2.0 to better compete with its centralized counterparts, said a blockchain engineer.
  • The Ethereum-based decentralized exchange Kyber Network is partnership with the Ethereum Layer 2 scaling solution Polygon Network to improve the liquidity of decentralized finance (DeFi).
  • Step Finance trading dashboard is aggregate Solana’s decentralized exchanges (DEXs), including automated market maker Raydium, SerumDex, and Orca, provide traders with faster access to pricing information.
  • The Solana Foundation has LED a $ 3 million investment in the PARSIQ blockchain data platform.

Relevant news

Other markets

Almost all of the digital assets on CoinDesk 20 landed lower on Wednesday.

Notable Losers as of 9:00 PM UTC (4:00 PM ET):

Chain link (LINK) – 5.18%

crave finances (YFI) -5.09%

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