Fed action hurts cryptocurrencies
Bitcoin falls as much as 4%. Ether declines as much as 7.2%.
Cryptocurrencies came under pressure Wednesday after the Federal Reserve delivered another big interest rate hike and warned of economic pain from the aggressive policy tightening still to come.
Bitcoin, the largest token, fell as much as 4% and came perilously close to dropping below $18,000, in touching distance of levels last seen in 2020. The second-biggest coin, ether, continued to underperform, shedding as much as 7.2%.
The Fed’s determination to raise rates to levels that hammer inf lation at the cost of asset prices sent a chill across global markets. Shorter-maturity Treasury yields jumped while longerterm rates fell, deepening a bond curve inversion seen as a harbinger of recession.
Such a backdrop offers little respite for crypto markets. They were already reeling from a $2-trillion plunge from a 2021 record high, an unraveling pockmarked with blowups such as the Three Arrows Capital hedge fund and the Terraform Labs project — whose cofounder, Do Kwon, is wanted by authorities.
“If the Fed keeps tightening, unless it implements yield curve control to keep the curve positively sloped, the crypto system will see a lot more failures,” said Brian Pellegrini, founder of Intertemporal Economics.
The MVIS CryptoCompare Digital Assets 100 Index is down this week, taking its losses for 2022 to about 62% compared with 22% for global stocks.
JPMorgan Chase & Co. Chief Executive Jamie Dimon didn’t help the mood in digital asset markets by reaffirming his skepticism and calling tokens “decentralized Ponzi schemes.”
Bitcoin was about $18,670 as of 9:50 p.m. Wednesday in Los Angeles. Ether was around $1,260 and continues to be pummeled as an earlier rally sparked by hype around the upgrade of its ethereum network unwinds. Coins such as solana and avalanche were also in the red.
Some traders might look to measures such as bitcoin’s 14-day relative strength index for affirmation that a bounce is possible. The RSI, a momentum gauge, is close to oversold levels. But contrarian bets appeared few and far between for riskier assets after the Fed’s interest rate action.