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Fed's hawkish pause doesn't please cryptos; Bitcoin´s back to $27,000

By Álvaro Estevez / Alejandra Zamora

Date: Thursday 21 Sep 2023

Fed's hawkish pause doesn't please cryptos; Bitcoin´s back to $27,000

(Sharecast News) - There´s been a downward turn in the cryptocurrency market. Bitcoin (BTC) slows its climb and is just below $27,100 and Ethereum (ETH) drops 0.8% in the last 24 hours and is heading towards $1,600.
This adjustment has followed the Federal Reserve's (Fed) latest monetary policy decision. The U.S. central bank delivered as expected... in a half-hearted fashion: interest rates did not rise at this meeting, but the Fed warned that it is prepared for one more hike in the remainder of the year if necessary. The members of the Federal Open Market Committee (FOMC) markedly raised their growth forecasts, lowered their estimate of the unemployment rate and, above all, maintained their forecast for core inflation, which justifies an additional hike in 2023 and only a 50 basis point drop in 2024.

The Fed's hawkish pause was endorsed by statements from Chairman Jerome Powell, who assured that "it is more likely to be relevant to raise rates again at either of the remaining two meetings this year than not." "We want to see really convincing evidence that we have reached the appropriate level, and we are seeing progress and we welcome that. But we need to see more progress before we're ready to reach that conclusion," he added.

Digital assets followed in the wake of equity markets after Powell's remarks and Bitcoin momentarily lost $26,900. The drop in prices reflects the market's lack of conviction in the Fed's projections, as it has been heavily criticized in recent hours for its latest decision. Also, the consensus gives a few more points of probability to a Fed rate hike in the remainder of the year, according to data from CME's FedWatch tool, but the majority sentiment is for two more pauses: dropping 66.5% in November (-3.6%) and falling 5.2% in December (-6%).

"We find it hard to take today's announcement too optimistically. We were surprised that the report emphasized slower rate cuts than previously expected," explained Michael Silberberg, head of investor relations at AltTab Capital.

Zach Panndl, economist at Grayscale Research, noted that the Fed "has embraced the idea of a soft landing: they see stronger growth and lower unemployment, and still expect to get back to their inflation target." "The last soft landing was in the mid-1990s, and this proved to be a terrific outcome for technology-related assets. While we can't be sure there will be a soft landing, that scenario could be positive for Bitcoin and Ether (ETH)," he added.

Notably, Grayscale recently applied to launch an ETH futures exchange-traded fund (ETF) for the second time. The new application is under the Securities Act of 1933, as opposed to the previous application, which was based on the Investment Company Act of 1940. Although the reasons for this move are unknown, it is believed that it may increase the likelihood that the launch of this ETF will be approved.

On the technical side, César Nuez, technical analyst at Bolsamanía, highlighted that Bitcoin manages to hold, for the moment, in the vicinity of the important support level it presents at $24,745. "The abandonment of these prices would make it lose the 200-session average and would make us think of an extension of the falls to the level of $20,000," he remarked.

In other market news, declines have been predominant. XRP and cardano (ADA) drops 1%, as well as Binance coin (BNB), while Dogecoin (DOGE) rebounds moderately.


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