‘Bullish rate hike’ — Why crypto spiked today in the face of bad news

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Cryp­to mar­kets have been pump­ing since the announce­ment of a 75 basis point inter­est rate hike in the Unit­ed States, with experts explain­ing that the mar­kets may have been ini­tial­ly brac­ing for much worse. 

On July 27, price of Bit­coin (BTC) surged around 8% to the mid $22,500 mark fol­low­ing the Fed­er­al Open Mar­kets Com­mit­tee (FOMC) deci­sion to raise inter­est rates yet again. Many oth­er top cryp­to assets surged in price as well, with Ether (ETH), Polka­dot (DOT) and Poly­gon (MATIC) all see­ing notable dou­ble-dig­it gains over the past 24 hours. 

Quan­tum Eco­nom­ics founder and CEO Mati Greenspan on Wednes­day jok­ing­ly ques­tioned whether this was a “bull­ish rate hike” on Twitter. 

Speak­ing with Coin­tele­graph, Greenspan not­ed that investors were clear­ly expect­ing worse and sug­gest­ed this lat­est bounce is noth­ing out of the ordinary.

“Mar­kets love going up on Fed days, even when their deci­sion is to be tough. Pow­ell is par­tic­u­lar­ly skilled at deliv­er­ing bad news. Clear­ly investors were expect­ing worse.”

The Fed’s attempts to reel infla­tion in by increas­ing inter­est rates are usu­al­ly asso­ci­at­ed with a pull­back of invest­ment activ­i­ty across markets. 

How­ev­er, there are mixed opin­ions amongst the com­mu­ni­ty about whether the lat­est pump will have enough momen­tum to sus­tain upwards, or if there is a sig­nif­i­cant retrace­ment on the cards before the mar­ket starts to ful­ly recover. 

Pav Hun­dal, an ana­lyst at Aus­tralian cryp­to exchange Swyftx told Coin­tele­graph that the com­pa­ny was “sur­prised at the exu­ber­ance of the reac­tion to yesterday’s rate hike,” as the under­ly­ing macro land­scape still seems up in the air.

The Fed is say­ing one thing and the mar­kets seem to be hear­ing some­thing else every time we see rate ris­es. In June, it was the Fed sug­gest­ing large rate hikes would be ‘uncom­mon,’ this time around its Jay Pow­ell hint­ing that the pace of increase might ‘slow’.”

“The best gauge of what’s to come is the under­ly­ing eco­nom­ic data and for now at least, it does look like some infla­tion­ary pres­sures are eas­ing, with gas prices falling along­side futures prices for sta­ples like corn and wheat, as well as some ship­ping costs,” he added. 

Relat­ed: Ethereum price ‘cup and han­dle’ pat­tern hints at poten­tial break­out ver­sus Bitcoin

Hun­dal went on to note that Swyftx saw a 100% increase in ear­ly trad­ing sur­round­ing the news, indi­cat­ing that “there’s clear­ly a lot of peo­ple who see val­ue in the cur­rent mar­ket prices.”

The ana­lyst empha­sized that a broad­er bull­ish or bear­ish trend will not like­ly become appar­ent until the U.S. releas­es impor­tant data relat­ing to the per­for­mance of its gross domes­tic prod­uct (GDP) in the com­ing days, which could sig­nal whether the coun­try is offi­cial­ly in reces­sion or not: 

“The good news is we’re not going to have to wait too long to see what hap­pens to the cryp­to mar­ket when any ini­tial volatil­i­ty wash­es out. The U.S. is about to release its GDP data and that’s going to be a big stress test. Any neg­a­tive sen­ti­ment here could wipe out recent gains.”

“But if the macro land­scape starts to show signs of resilience, we could see the cryp­to mar­ket cap sta­bi­lize at the $1 tril­lion USD point and ral­ly from there,” he added.



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