The crypto market is down today as the hawkish language of the Federal Reserve suggests that the next interest rate hike will exceed market consensus.
The cryptocurrency market is down today after a sharp pullback in the US stock market after US Federal Reserve Chairman Jerome Powell issued statements regarding interest rates and high inflation.
The price of Bitcoin is currently trading at $22,300, which is an alarming level for traders who believe that a fall below $22,000 will trigger a trend reversal to $19,000. Similar concerns exist for Ethereum, which is currently trading at $1,555 with a key support level at $1,450.
The cryptocurrency market is not immune to volatility, and typically, sharp price movements are observed before the release of key economic reports and the Federal Reserve’s announcement of monetary policy and interest rate hikes.
The future of cryptocurrencies and stocks is in the hands of the Fed
On March 7, Fed Chairman Powell suggested that economic data for February could show higher-than-expected inflation.
“The latest economic data is stronger than expected, suggesting that the final level of interest rates is likely to be higher than expected.
Powell added that:
“If all the data pointed to the need for faster tightening, we would be ready to accelerate the pace of rate hikes.
After these announcements, the DOW and S&P 500 indexes fell by 1.18% and 1.08%, while BTC returned to $21,927. The expected reaction to the hot inflation message is a higher-than-expected rate hike on March 22, when the FOMC meeting closes. and Powell will release an economics guide to explain the extent of inflation.
Prior to today’s announcement, market consensus was for a 0.25% rate hike within a target range of 4.75% to 5.0%, but that estimate could change over the next few weeks, especially if Powell continues to fuel the war.
In fact, CME Group data showed that market participants were expecting more than a 50 percent chance of a 50 basis point upturn by the March 21-22 meeting.
Liquidity concerns grow as US cracks down on stablecoin issuers and Silvergate Bank falters
The recent enforcement actions against Paxos and Binance, as well as the recent SEC crackdown on centralized staking, have also prevented a sustained bullish momentum from developing in the market. While some decentralized staking protocols may benefit from recent enforcement measures, the regulatory environment for cryptocurrencies is still unclear and uncertainty often results in market volatility.
The cryptocurrency industry and regulators have long been at odds with each other due to various misconceptions or distrust of the real use case for digital assets. The most recent battle centers around how centralized exchanges (CEXs) can use client funds.
SEC Chairman Gary Gensler issued the following warning:
“If this area has any chance of survival and success, it is the proven rules and laws to protect investors. Don’t go into the client’s pocket by using their funds for their own platform.
The SEC launched a recent round of enforcement action by reviewing Kraken’s revenue program on Feb. 9. -service program”, which, in the opinion of the commission, qualified as a sale of securities. In addition to the monetary penalty, Kraken agreed to stop earning the program’s trades.
The enforcement action also caused Nexo to end its centralized staking program. While some argue that the staking ban is yet another nail in the cryptocurrency’s coffin, Coinbase CEO Brian Armstrong has vowed to fight the action if it sees legal action. Not all members of the Securities and Exchange Commission agreed with the enforcement action against Kraken, but the agency has announced further enforcement action as a result of the decision.
On February 13, the SEC issued a notice to Paxos, the stablecoin issuer, stating that BUSD is an unregistered security. Following the SEC announcement on the same day, New York regulators ordered Paxos to stop issuing BUSD, which is the third largest stablecoin in the cryptocurrency market.
Concerns about the solvency of Silvergate Bank also affect prices in the cryptocurrency market. Silvergate has been one of the main entry routes into the cryptocurrency market, and its potential demise could make it harder for the industry to cash flow.
Cryptocurrency prices were poised for a pullback after a stellar start to 2023
Bitcoin and the cryptocurrency market started 2023 well, with 64% of BTC investors achieving profitability as the price of BTC reached $25,300 on February 21st. Even bitcoin-fighting miners saw significant growth, with revenue up 50% to $23 million, signaling a recovery from the beleaguered industry.
Large crypto investors believe that more sell-offs are on the horizon, while bitcoin analysts are issuing warnings of a continuation of the long-term downtrend. There is a gap in CME futures below $20,000 and some traders expect the price of BTC to return to this level at some point in the future.
At the same time, investor risk appetite should remain subdued and would-be crypto traders might consider waiting for signs that US inflation has peaked or the Fed is signaling a currency hike as lower interest rates are to be expected. A more transparent regulatory roadmap for the cryptocurrency industry will also help improve industry sentiment.
In this video you will find 3 best cryptocurrencies to buy and hold in 2023: