Cryptos Join World Markets In Cheering Fed Pivot

Cryptocurrencies joined world markets in jubilation as the Fed hinted at an end to rate hikes and indicated potentially lower interest rates by the end of 2024. As widely expected, the Fed also maintained status quo on rates.

The Fed also published its latest assessment on inflation, economic growth and unemployment. In the Summary of Economic Projections issued on Wednesday, the Fed has reduced the inflation forecast for 2023 to 2.8 percent, versus 3.3 projected in September and 3.2 percent projected in June. Acknowledging the fall in inflation, the projections have also been reduced for the medium term, with the 2024 projection reduced to 2.4 percent and the 2025 level seen lower at 2.1 percent.

The forecast of growth or the change in real GDP in 2023 has been hiked to 2.6 percent, versus 2.1 percent projected in September and 1 percent projected in June. The projection of the 2023 unemployment rate has been maintained at 3.8 percent, versus 4.1 percent projected in June.

The dovish tilt by the Fed is reflected in the projections for the federal funds rate. The median year-end projection for the federal funds rate has been reduced to 5.4 percent, from 5.6 percent projected in September. The same is projected to decrease to 4.6 percent by 2024 versus 5.1 percent projected in September. The projection for 2025 has also been reduced to 3.6 percent from 3.9 percent projected in September. The long-run projection of 2.5 percent has however been maintained steady.

Amidst the euphoria, the overall crypto market capitalization jumped to $1.62 trillion, from $1.56 trillion a day earlier. Only 3 cryptocurrencies among the top 100 are trading with overnight losses of more than 1 percent.

The Dow Jones Industrial Average surged to a fresh peak of 37,090 whereas ten-year bond yields in the U.S. dropped to as low as 3.932 percent. The Dollar Index too felt the brunt of the Fed’s dovish tilt as it slumped to 102.28 before recovering to its current level of 102.44. Gold Futures for February settlement jumped to a high of $2,055.10, before correcting to its current level of $2,045.15 recording an overnight jump of 2.4 percent.

Bitcoin jumped 2.5 percent in the past 24 hours amidst the Fed pivot but unlike other assets that scaled fresh peaks, BTC is trading more than 37 percent below the all-time high of $68,789.63 recorded in November 2021.

Though Bitcoin touched a high of $43,429.78 in the past 24 hours, it has suffered a decline of close to 2 percent in the past week. Bitcoin’s price movement comes amidst fresh reports of famed crypto Bull Cathie Wood of Ark Invest selling shares of Grayscale Bitcoin Investment Trust (GBTC).

Ethereum (ETH) added 3.7 percent in the past 24 hours and 1 percent in the past week. Ethereum outperformed Bitcoin in the past 24 hours as well as the past week amidst predictions that Ethereum would outperform Bitcoin in 2024. BitcoinSystemi, has in its report on Thursday stated that JP Morgan analysts have cited the upcoming EIP-4844 upgrade, also known as Protodanksharding, as a key catalyst for Ethereum’s revival.

Among the top-10 non-stablecoin cryptocurrencies, Solana (SOL) and Polkadot (DOT) recorded overnight gains exceeding 6 percent. Cardano (ADA) added close to 4 percent. XRP (XRP) and Dogecoin (DOGE) have both gained more than 2 percent. TRON (TRX) saw a price increase of a little over a percent.

9th ranked Avalanche (AVAX) slipped 3.6 percent in the past 24 hours. AVAX has however added 43 percent in the past week and 247 percent in 2023 till date. BNB (BNB) edged lower during the same period.

71st ranked Bonk (BONK) topped overnight gains with a surge of 44 percent. 87th ranked WOO Network (WOO), 65th ranked Helium (HNT), 31st ranked Injective (INJ) and 57th ranked ORDI (ORDI), all added more than 20 percent in the past 24 hours.

46th ranked FTX Token (FTT) slumped 5.8 percent in the past 24 hours but is still holding on to more than 8 percent gains in the past week.

53rd ranked Synthetic shed 3.6 percent in the past 24 hours while weekly gains exceed 13 percent.

Meanwhile the Financial Accounting Standards Board on Wednesday issued an Accounting Standards Update intended to improve the accounting and disclosure regarding crypto assets.

Accordingly, an entity would be required to measure crypto assets at fair value each reporting period with changes in fair value recognized in net income. Entities would also be required to disclose significant holdings, contractual sale restrictions, and changes during the reporting period. The amendments are expected to improve the information provided to investors about an entity’s crypto asset holdings.

The amendments are effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years.

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