Cryptos Muted As Fed Hints Of Pain Ahead

Cryptocurrencies remained muted close to the flatline amidst the Fed delivering the third 75-basis points rate hike and reiterating its strong commitment to returning inflation to the 2 percent objective.

The Fed raised the target range for the federal funds rate to 3 to 3.25 percent and also hinted at ongoing increases in the target range. The Committee also reiterated its commitment to continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

In the Summary of Economic Projections issued on Wednesday, the Fed has increased the inflation forecast for 2022 to 5.4 percent, from the 5.2 percent projected in June and 4.3 percent projected in March. Inflation is however seen reducing to 2.8 percent by 2023, to 2.3 percent by 2024 and to 2 percent by 2025.

The forecast of growth or the change in real GDP in 2022 has been lowered to 0.2 percent from 1.7 percent projected in June and 2.8 percent projected in March. The unemployment rate has however been forecast to rise to 3.8 percent, from 3.7 percent projected in June and 3.5 percent projected in March.

The median year-end projection for the federal funds rate has moved up to 4.4 percent from 3.4 percent earlier. The same is projected to further increase to 4.6 percent by 2023, and thereafter reduce to 3.9 percent by 2024 and 2.9 percent by 2025.

The upward revision to the forecasts of inflation, unemployment and the federal funds rate as well as the downward revision to projections of growth, implying economic pain for some more time, exacerbated the pain of the third 75-basis points hike. The Dollar Index strengthened to a fresh twenty-year high of 111.81. The Bank of England raising key rates by 0.50 percent also added to the negative sentiment.

With the recent hike, the Federal Funds rate is the highest that Bitcoin has ever seen. Rates were at 3.50 percent in January 2008, long before the Bitcoin White Paper was released.

Overall crypto market capitalization is at $932 billion, versus $933 billion a day earlier. Crypto market is currently dominated 39.5 percent by Bitcoin, 17.2 percent by Ethereum, 16.3 percent by stablecoins and 27 percent by residual altcoins.

Bitcoin is currently trading at $19,238.14, up 0.40 percent on overnight basis. BTC ranged between $19,674.63 and $18,290.32 in the past 24 hours.

Ethereum declined close to 3 percent in the past 24 hours and is currently trading at $1,309.80. Ethereum ranged between a high of $1,384.48 and a low of $1,229.43 in the past 24 hours. Ethereum ranked 4th among the cryptocurrencies that declined in the past 24 hours.

6th ranked XRP (XRP) added 8 percent overnight to clock a weekly growth of more than 30 percent amidst a surge in trader optimism as well as high whale movements.

8th ranked Cardano (ADA) gained 1 percent overnight, ahead of its Vasil upgrade which is expected to enhance network’s performance by augmenting throughput, script efficiency and reducing latency in block transmission.

28th ranked Algorand (ALGO) and 86th ranked Decred (DCR) gained more than 15 percent overnight. 87th ranked Celsius (CEL) also rallied more than 12 percent in the past 24 hours.

100th ranked TerraClassicUSD (USTC), 44th ranked EOS (EOS) and 34th ranked Terra Classic (LUNC) declined more than 4 percent in the past 24 hours.

The CoinShares’ Digital Asset Fund Flows Weekly report on institutional investments showed inflows of $7 million for the week ended September 16. Bitcoin recorded inflows of $17 million whereas the Short Bitcoin product recorded inflows of $3 million. Coinciding with The Merge, Ethereum recorded outflows of $15 million. Year-to-date flows remained positive at $414 million while month-to-date flows were negative at $62.3 million. The aggregate Assets Under Management stood at $26,896 million.

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