On Wednesday, major cryptocurrencies faced a downturn following the conclusion of the Federal Reserve’s two-day June meeting, during which interest rates were left unchanged. However, senior officials hinted at the possibility of implementing another 50 basis points of rate hikes if inflation fails to slow down at a satisfactory pace.
Comparing the Numbers
According to CoinDesk data, Bitcoin (BTCUSD) witnessed a 3% drop over the past 24 hours, reaching approximately $25,068 on Wednesday. Despite a year-to-date increase of over 56%, Bitcoin still remains more than 60% below its peak in 2021.
Ether (ETHUSD) experienced a more significant decline, tumbling 5.3% within the past 24 hours and settling at around $1,646 on Wednesday.
Further Hikes Possible
During a press conference, Federal Reserve Chairman Jerome Powell mentioned that a crucial inflation indicator remains persistent, implying that the central bank may need to implement a few more rate hikes before reaching peak rates.
The Federal Reserve’s “dot plot” forecast, which reflects policymakers’ individual rate projections, also indicated the possibility of further rate hikes this year. The benchmark rate is projected to rise to a range of 5.5% to 5.75%, surpassing the current range of 5% to 5.25%. This revised terminal rate forecast suggests a potentially more aggressive approach by the central bank.
However, Michael Safai, partner and co-founder at Dexterity Capital, believes that Wednesday’s decline in the Cryptocurrencies market can be attributed more to thinner liquidity and weak sentiment rather than the Federal Reserve’s meeting. In his emailed comments, Safai stated that Cryptocurrencies prices followed a similar trajectory to stocks after the Fed’s press release and conference, with no surprises. He emphasized that the current low trading volumes make it relatively easy for a moderate sell order to trigger liquidations.
Traders Under Scrutiny
In the stock market, the Dow Jones Industrial Average (DJIA) closed down by 232 points or 0.7%, while the S&P 500 (SPX) and the Nasdaq Composite (COMP) experienced slight gains of 0.1% and 0.4% respectively, according to FactSet data.
Safai further noted that Cryptocurrencies traders are becoming increasingly cautious due to heightened regulatory scrutiny from U.S. authorities, often accompanied by lawsuits. As a result, these traders are more inclined to hold onto their investments rather than actively engage in trading activities.
As the Cryptocurrencies market faces a decline, influenced by both market factors and regulatory concerns, investors and traders will continue to monitor the Federal Reserve’s actions closely, particularly with regard to potential rate hikes and their impact on the overall market sentiment.
