- Many top crypto assets have broken their week-long downtrends following yesterday’s Federal Open Market Committee meeting.
- Bitcoin has bounced from its $20,000 psychological support level to take another shot at reclaiming its 200-week moving average
- All eyes are now watching to see whether Bitcoin will be able to hold its previous cycle high of around $19,641 in the face of growing macroeconomic adversity.
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Defying bearish expectations, the crypto market appears to have stabilized around The Federal Reserve’s commitment to aggressive rate hikes.
Crypto Breaks Downtrend
The crypto market appears to have stabilized—for now.
Many top crypto assets have broken their week-long downtrends following yesterday’s Federal Open Market Committee (FOMC) meeting. Federal Reserve Chairman Jerome Powell confirmed predictions that the U.S. government would begin taking a more aggressive stance to fight inflation by raising interest rates by 75 basis points—the largest increase since 1994.
While hiking rates to fight inflation is typically bad for risk-on assets such as cryptocurrencies, the recent news seems to have dispelled some uncertainty in the market, with the Fed’s firm commitment to a more hawkish stance bringing about a slight relief rally. Bitcoin has bounced from its $20,000 psychological support level to take another shot at reclaiming its 200-week moving average, which currently sits at around $22,300.
Other crypto assets have fared noticeably better. Ethereum, the second-largest cryptocurrency behind Bitcoin, has gained over 8% on the day, similarly rebounding from the $1,000 level. Layer 1 chain Solana is another noticeable winner, jumping 11% from its Tuesday lows of $27.20. It currently trades at around $31.
Despite being the biggest rate increase in almost three decades, the Fed’s 75-point hike was not wholly unexpected. Last Friday, the most recent Consumer Price Index report revealed that contrary to some economists’ expectations, inflation had not peaked in April and had instead climbed to a new yearly high of 8.6%. Due to the CPI numbers, market participants likely anticipated a more severe rate hike, meaning that the 75-point hike was “priced in” to many traders’ expectations.
However, the long-term market outlook still appears shaky. Yesterday’s FOMC meeting also revealed that the median year-end projection for the federal funds rate had moved up to 3.4% for the end of 2022, increasing the possibility of more aggressive rate hikes for the rest of the year.
In the crypto market, all eyes are now watching to see whether Bitcoin will be able to hold its previous cycle high of around $19,641 in the face of growing macroeconomic adversity. If this level breaks, it will be the first time in Bitcoin’s history that it has failed to hold the previous cycle’s all-time high as support.
Disclosure: At the time of writing this piece, the author owned ETH, SOL, and several other cryptocurrencies.