The Federal Reserve raised the interest rate another 0.75% and the crypto markets reacted oddly. US interest rates have returned to pre-pandemic levels as the battle against inflation rages on. The crypto market has therefore rallied in response to rising rates as trader sentiment shocks market skeptics.
Only surprises here
Griffin Ardern, trader at Blofin, is among those who think the market should crash in light of the news.
“Given that the overall risk level of the crypto market has not returned to a reasonable level, it is very likely that the price of BTC will drop more than 10% after the Fed rate hike,” said he declared.
However, the crypto market reacted the opposite way as the price of BTC briefly surged from $24,000. ETH also saw a breather after the price rebounded above $1,750 before consolidating just above $1,700. Lucas Outumuru, Head of Research at IntoTheBlock, has compiled a Report following the Fed’s decision. Both Bitcoin [BTC] and Ethereum [ETH] fees fell more than a third over the week from last week’s values. Additionally, approximately $200 million in BTC and ETH holdings were withdrawn from centralized exchanges.
Correlations between Bitcoin and Nasdaq 100 prices hit their highest level in 90 days. Ergo, it’s pretty obvious that the market “bought the news”, thus improving the case for crypto as a top-tier asset.
In another major development, it was found that 60% of BTC (or 12.69 million BTC) is owned by long-term investors. These addresses have increased holdings by 2.7 million over the past year or so. The trend only increased during the price decline in 2022 as Bitcoin continued to lose value. Historically, the long-term accumulation of crypto has aligned with the crypto markets. This further cements the “HODL” mentality that will eventually decide the price floors for Bitcoin.
What does this mean in the long term?
The market continues to remain correlated to current macro conditions “creating its own merits for growth.” These relate to both investor accumulation and broader fundamental shifts occurring in the underlying technology. However, this cannot be seen as the end of the bear market, but as a period of respite or relief so to speak.