Crypto update today.
The cryptocurrency market is still unstable following the Federal Open Market Committee (FOMC) announcement and press conference with Fed Chairman Jerome Powell on June 14th, which revealed the central bank’s decision to pause rate hikes for June.
Although this move was expected by investors, the crypto market has not yet shown any bullish momentum. Powell also mentioned that at least two more rate hikes would be necessary in the future.
Bitcoin’s price began the day above $26,000 but has since dropped to a 24-hour low of $25,791 after the FOMC announcement. Some analysts are predicting an inevitable drop to $25,000 based on the current state of BTC derivatives data.
The lack of a bullish response to the rate hike pause could be attributed to the SEC’s charges against Binance and Coinbase exchanges, resulting in muted crypto price action.
- XRP drops to support level following release of Hinman documents.
- Graph moves to Arbitrum.
- BTC, ETH, BNB, XRP, ADA, DOGE, SOL, MATIC, LTC, DOT Price analysis ...
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FOMC tanks crypto and some equities
The stock market fell sharply on June 14th after the FOMC decision, with the Dow dropping 200 points just minutes after the announcement. The S&P 500 index, however, hit a 13-month high.
Although Powell has decided to pause interest rate hikes, the Federal Reserve remains focused on bringing down elevated inflation.
In its policy issuance, the Federal Reserve stated,
“In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
These statements indicate a potential return to interest rate hikes in the future. So far, crypto prices are still highly correlated with the Dow and S&P 500, and most major banks still anticipate a sharp recession in the US at some point in 2023. However, this has not stopped major stock indices from reaching yearly highs after the United States debt ceiling deal.
According to US Bank analysis, which incorporates more than 1,000 data points, investor sentiment about the current state of the economy remains low.
Robert Haworth, Senior Investment Strategy Director at US Bank, said,
“Overall, the US economy is slowing, but not reaching recession.”
The pause in interest rate hikes is causing volatility across equities and cryptocurrencies.
Crypto sector regulation is still the main threat
Regulation has been a constant topic in the recent cryptocurrency news cycle. While the EU has unveiled a digital asset framework, MiCA, the United States seems intent on regulating through SEC enforcement.
On June 5th and 6th, the United States Securities and Exchange Commission filed civil lawsuits against two of the largest centralized exchanges in crypto, Binance and Coinbase. The SEC claims that 61 different cryptocurrencies, representing $100 billion in value, are securities.
One of the 61 crypto tokens listed was Algorand (ALGO), a token that Gensler called a “great technology” in 2019, which seems to contradict this latest enforcement action.
Other top crypto tokens specifically mentioned as securities include Binance USD (BUSD), Binance Coin (BNB), Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Axie Infinity (AXS), and COTI.
The recent SEC action adds to a long history of disputes, misconceptions, or mistrust over the actual use case of digital assets. After the FTX implosion, some feel U.S. lawmakers are angry with the crypto industry. The most recent battle is centered on how centralized exchanges can use customer funds.
However, not all lawmakers are comfortable with Gensler’s actions. United States Rep. Warren Davidson (OH) introduced the “SEC Stabilization Act” into the House of Representatives on June 12th, which would remove Gensler as Chair and redistribute power amongst a committee.
TVL and volume remain low
The total value locked metric (TVL) is a common way to examine the health and sentiment of the crypto market. Despite the movement towards on-chain self-custody, decentralized finance (DeFi) has not witnessed any growth. TVL across all protocols dropped 0.5% in the past 24 hours and shed $120 billion since April 5, 2022. The attack on centralized exchanges has also increased Bitcoin exchange inflow and outflow. Exchange inflows indicate increased sell-side pressure while outflows are typical to self-custody assets.
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Considering heavy macro headwinds, upcoming rate hikes and low volume, it is likely that the volatility in the crypto market will remain for the foreseeable future.