The small recovery in the crypto markets this week has almost retreated, as major cryptocurrencies have dipped as much as 7% in the past 24 hours amid a sharp outlook from the US Federal Reserve (Fed) to reduce inflation.
At a meeting Wednesday, Fed Chairman Jerome Powell said the agency was ready to raise interest rates in March and could even raise rates “at every meeting” to address inflation concerns after a record-breaking purchase program. Seven more meetings are planned for this year.
Asian markets were intimidated on Thursday. Hong Kong’s Hang Seng Index, which tracks the 60 largest companies, fell 2%, while Korea’s KOSPI ended the day with a 3% decline. In Europe, Germany’s DAX, which tracks blue companies, started the day with a nearly 1% drop. Futures of U.S. stock markets have fallen marginally in pre-market trading.
The decline in equities has also shifted to the crypto markets, which serve as a risky asset in investment portfolios. Bitcoin and ether, the world’s two largest cryptocurrencies in terms of market capitalization, have fallen 4% in the past 24 hours to maintain levels. Bitcoin fell below $ 37,000 to hit support at $ 35,500 before gaining more than $ 1,000 at the time of writing.
“Bitcoin has been showing positive dynamics all day against the backdrop of rising stock indices,” analysts at FxPro told CoinDesk in an email. “Until the Fed meeting, the first cryptocurrency gained more than 6%, reaching 5-day highs above $ 38,800. However, BTC began to fall almost immediately after the announcement of the results of the two-day Fed meeting.
“The regulator announced a tightening of bond purchases in early March, as well as an imminent rate hike, followed by a reduction in the Fed’s balance sheet,” analysts added.
Major cryptocurrencies such as Avalanche (AVAX) and Solana (SOL) fell by as much as 8% during Asian morning hours, while tokens from emerging blockchains such as Cosmos ’ATOM and Near’s NEAR token fell 13%.
Layer 1, or base, crypto investor bets have fueled price increases in the FTM tokens of ATOM, NEAR and Fantom in recent months, which have been supported by investors ’search for returns and top out of the ethereum ecosystem. But such tokens have been among the worst performers in recent crypto sales, falling sharply only in the past month.
In the past week, SOL has declined by 34%, while NEAR investors have sustained losses of 33%. Terra’s LUNA, Polkadot’s DOT, and Cardano’s ADA tokens saw a similar decline in the same period, data of an analysis tool CoinGecko shows. Bitcoin, by contrast, fell 13%.
A saving grace among major cryptocurrencies by market capitalization were the two signs of Theta Network ‘, THETA and TFUEL. The tokens power services on the block-based video sharing platform and have been up 13% and 22% respectively in the past 24 hours. The move came ahead of a flight to THETA owners scheduled for Feb. 1, which may have stimulated interest among investors and traders.
Crypto markets have staged a slight recovery in press time, with some investors continuing to downplay the effects of Fed policy on the broader market.
There are “many reasons to believe that the secular macro-interest rate is still low. Interest rates are low due to increased technological growth,” Haseeb Qureshi, founder of cryptocurrency fund Dragonfly Capital, said in a telephone interview.
“Cryptography is one of the few things that people realize has broad growth potential,” Qureshi added.