Friday, June 10 2022

Bitcoin fell on Tuesday, a day before the Federal Reserve raised its benchmark interest rate by 50 basis points and began unwinding its nearly $9 trillion balance sheet.

The BTCUSD cryptocurrency,
was trading around $37,758, down 2.3% in the past 24 hours, according to data from CoinDesk. The Dow Jones Industrial Average DJIA,
closed up 0.2% on Tuesday at 33,341.58.

Bitcoin and growth stocks have been trading roughly in tandem lately, with bitcoin down around 18% in the past 30 days and the tech-heavy Nasdaq Composite COMP.
down 12% for the same period, according to FactSet. The downward moves come as central bank officials signaled they plan to tighten monetary policy to fight inflation.

Although bitcoin saw a bigger loss, it remains “surprisingly robust” against the stock market, according to on-chain crypto data provider Glassnode. Bitcoin has been trading in a range of $36,000 to $48,000 since the start of this year, still well above the summer 2021 low of $28,825. However, the Nasdaq Composite closed at 12,334 on April 29. , the lowest level since November 2020. .

“We haven’t really seen any real type of stress test, in my view,” Michal Benedykcinski, senior vice president at crypto asset management firm Arca, told MarketWatch in an interview. Benedykcinski pointed out that $30,000 was an important support level for bitcoin.

“Without a clear trigger from the FOMC meeting [on Wednesday]I would expect further consolidation [for bitcoin] as options sellers try to get a return that short-circuits volatility,” said Abraham Chaibi, co-founder of quantitative crypto trading firm Dexterity Capital.

“I guess 50 basis points won’t be the trigger, because we’ve all seen that coming. that the Fed could take a softer stance on future hikes — could have a more significant impact,” Chaibi said.

Shawn Egger, global head of execution services at crypto broker sFox, will also be on tap for updates on the pace of the Fed hikes. “If there is an index that signals slightly dovish stocks and/or a decrease in the number or frequency of bulls, it could stabilize global markets accordingly,” Egger wrote to MarketWatch via Telegram.

Fed Chairman Jerome Powell signaled in April the need to move quickly to bring its benchmark interest rate to “a more neutral level” of interest rates, and perhaps higher if necessary. A 50 basis point hike is “on the table” for early May, Powell said.

“Flight to safety”?

The crypto market has seen a “flight to safety” in the space as participants sell smaller coins for bitcoin, the largest cryptocurrency by market capitalization.

Bitcoin is down around 20% since the start of this year, while the small cap token index is down 46% over the same period, according to research firm Arcane Research. Meanwhile, bitcoin’s dominance, which is measured by its market capitalization against that of the broader crypto market, reached 43.1% on April 30, the highest level since March 29.

Furthermore, poor public market performance “has only recently begun to trickle down” to private crypto markets, according to Arca’s Benedykcinski.

The company is starting to see some crypto companies and protocols priced more “reasonably” compared to the previous two quarters, Benedykcinski said.


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