Cryptos rise ahead of Fed rate decision
By Álvaro Estevez / Alejandra Zamora
Date: Wednesday 03 May 2023
(Sharecast News) - Cryptocurrencies are rising ahead of the Federal Reserve (Fed) interest rate decision. Bitcoin (BTC) and Ethereum (ETH) gain 2% in the last 24 hours to over $28,600 and $1,860, respectively.
After a fairly positive end to the week, the bankruptcy and bailout of First Republic Bank by JP Morgan sent digital assets plummeting, although in the last few hours they seem to have regained their tone. According to Edward Moya, senior market analyst at Oanda, this is because the swift reaction of the US financial sector has made it more resilient for investors. "It is looking like the US banking system has a playbook to deal with the next banking crisis when it emerges, which is somewhat dampening the case for cryptos," the expert explained.
For his part, Oanda analyst Craig Erlam also points out that Bitcoin is still unable to break through the significant resistance of $30,000. According to Erlam, "it isn´t clear" whether the latest pullback and subsequent price action following the Fed's decision will be enough to "trouble" those who expected a sustained recovery, but he stresses that a break below $27,000 "could spell trouble in the short-term".
In this regard, everything points to the Fed opting for a 25 basis point hike today, on Wednesday. This is what the market believes, as represented by the 86% probability that CME's FedWatch tool gives that the US central bank will take interest rates to the 500-525 basis point range.
Naeem Aslam, chief investment officer at Zaye Capital Markets, stated that what investors are now concerned about is what the Fed will do beyond this decision. "There is no doubt that many believe that the Fed will begin to slash interest rates towards the end of the year, but will we see any hints of this in the Fed's commentary today?" the expert questioned, as he also stressed that traders would also like to see what the Fed has to say about the on-going banking crisis and "whether it is willing to take any blame for it." "After all, the banking crisis only started due to aggressive monetary policy," he added.
In this regard, some US politicians have formally called on the Fed to abandon this bullish path in order to give the economy some breathing space. These include, according to various reports, Democratic senators Bernie Sanders and Elizabeth Warren, who have reportedly written a letter to Chairman Jerome Powell in which they point out that the banking crisis and the accumulated rate hikes leave the world's leading economy "more vulnerable to an overreaction by the Fed".
In the rest of the market, altcoins have been mixed with a predominance of somewhat smaller increases in some of the main altcoins. Polygon (MATIC) rises 1%, while Ripple (XRP), solana (SOL) or Cardano (ADA) fall below one percentage point.
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