The Fed Hits the Crypto Market

Key Insights:

  • The Federal Reserve sends riskier assets into the deep red, with the crypto market cap down $21.7 billion to $862.5 billion.
  • Today, the Vasil hard fork is due to take place, with ADA seeing a bearish run into Thursday.
  • Ripple holder optimism takes a breather as investors respond to the Fed.

The Federal Reserve Sinks the Crypto Market, Talking of More to Come

Today, the Federal Reserve hiked rates by 75 basis points, which was in line with market expectations. Despite the Fed holding back from a percentage point hike, the market reaction was bearish.

In response to the policy decision, rate statement, economic projections, and Fed Chair Powell’s press conference, the market cap rose to a high of $919.4 billion before tumbling to a low of $859.2 billion.

Crypto Market Cap 210922 Hourly Chart

Growth projections affirmed the market’s fear, with the FOMC projecting growth of 0.2% in 2022 and 1.2% in 2023. In June, the FOMC projected growth of 1.7% in both 2022 and 2023. Things were not much better for inflation. The FOMC revised the PCE inflation target for 2022 from 5.2% to 5.4% and from 2.6% to 2.8% for 2023.

As a result of persistent inflation, the FOMC projected the Federal Funds Rate (FFR) to hit 4.4% this year, an upward revision from June’s 3.4%. For 2023, the FOMC projects the FFR to reach 4.6%, an upward revision from June’s 3.8%.

FOMC Projections Sept 2022

Fed Chair Powell’s press conference provided little market comfort, reiterating the Fed’s commitment to bring inflation to target. Powell also stood by the Fed’s mantra of curbing inflation at any cost, saying,

“Will keep pat it until the job is done.”

The crypto market was not alone in responding adversely to the policy decision, projections, and press conference.

On Wednesday, the NASDAQ 100 fell by 1.79%, while the Dollar Spot Index (DXY) ended the day up 1.02% to 111.344. The crypto correlation with the NASDAQ was evident throughout the US session.

NASDAQ – Crypto Market Cap 210922 5-Minute Chart

The Vasil Hard Fork Countdown Begins

Today, the markets expect Cardano (ADA) to get a price boost as the market focus shifts away from the Fed to the Vasil hard fork.

However, ADA has been under intense selling pressure alongside the broader crypto market. Heading for the third loss from four sessions, ADA sits some way off from a September high of $0.524.

ADA losses come despite positive progress reports in the run-up to today’s hard fork.

We expect volatility to persist ahead of the hard fork, with the market reaction to the Ethereum (ETH) Merge likely to test buyer appetite. ETH tumbled post-Merge, catching investors off guard as the market bought the rumor and sold the news.

As of September 21, updates on the ADA Hard Fork Mass Indicators are as follows:

  • Thirty-nine exchanges are hard fork ready, rising by eight from September 20.
  • Nine are in progress, with Coinbase and Kraken still reporting upgrades in progress.
  • Twenty-one have yet to start the upgrade process.

From the top 12 exchanges by liquidity:

  • Eleven exchanges are hard fork ready.
  • Coinbase has yet to complete the upgrade.

Today, ADA is down 2.26% to $0.432, a modest loss relative to Sunday’s 7.82% sell-off.

ADAUSD 210922 Daily Chart

XRP Succumbs to Market Forces Despite Investor Optimism

Investor optimism towards the SEC v Ripple case supported an XRP rally to a Wednesday and September high of $0.4342.

XRP holders expect an early conclusion to the case after the parties filed Motions for Summary Judgments ahead of schedule. One area of interest has been the end of a long SEC battle to shield William Hinman’s speech-related documents under the attorney-client privilege.

A sudden shift in focus from the William Hinman speech-related documents to the sealing of court documents suggests an out-of-court agreement. The defendants filed the Motion for Summary Judgment without a Court ruling on the Hinman speech-related docs.

Until late July, the SEC had battled to shield the Hinman documents under the attorney-client privilege. A favorable conclusion should see XRP make its way back to $1.00, last visited in December 2021.

XRPUSD 210922 Daily Chart

New York Court Orders USDT to Show Financials

This week, the New York Courts ordered Tether (USDT) to provide balance, sheets, income statements, cash-flow statements, general ledgers, and P&L statements, among other documents, to the Court. While stablecoin scrutiny continues in the wake of the Terra collapse, the New York Court ruling came in response to a lawsuit dating back to October 2019.

Voyager Is in the Spotlight as Major Exchanges Target Voyager Assets

This week, news hit the wires of Sam Bankman-Fried run Alameda planning to repay a $200 million loan. In exchange, Voyager Digital would return $160…

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