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The crypto markets have shown some resilience despite the significant rate hike by the Fed on Wednesday in response to unyielding inflation.
Following the release of the US inflation numbers by the Labor Department last Wednesday, the Fed revealed that it would be raising rates by 75 basis points for the first time since 1994. Notably, inflation numbers have remained high despite recent hawkish actions and statements by the Fed.
It is worth noting that the crypto markets have become increasingly correlated with the US stock market, especially the tech stocks in the Nasdaq. Consequently, the price action of the crypto markets has also become increasingly sensitive to US inflation data and Fed rate hikes.
While usually, a rate hike of this magnitude would make investors apprehensive of speculative assets like crypto, Fed chair Jerome Powell’s assurances that the Fed is unlikely to continue to raise rates by this magnitude in the future appears to have given investors a boost.
“Today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common,” said Powell, according to Bloomberg News.
Consequently, the crypto markets have shown signs of a resurgence. Bitcoin and Ethereum posted gains of about 6.1% and 6.6% during the Asian session, even as the total crypto market cap once again sat above $900 billion.
At the time of writing, while these digital assets are still trading in the green in the last 24 hours, some of the earlier gains have been shed. Bitcoin is up 2.48%, trading around the $20,566 price point, Ethereum is up 2.13%, trading around the $1,120 price point, while altcoins like BNB, ADA, XRP, Solana, and AVAX are up 1.15%, 2.53%, 1.18%, 1.48%, and 4.45% respectively.
It is yet to be seen whether the crypto markets will sustain this new momentum. However, it is worth noting that Galaxy Digital CEO Mike Novogratz believes we are close to the bottom, setting it at $20k for Bitcoin and $1k for Ethereum. According to Novogratz, we will see explosive upward moves in the crypto market the moment the Fed eases its hawkish stance.
While pundits like veteran trader Peter Brandt agree that the $20k price level should provide strong support for Bitcoin, Brandt also believes that a break below the price point could see the asset drop to the $13k price point.
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