Cryptocurrencies moved higher today after the market seemed to take to the Federal Reserve’s first meeting of 2023, which concluded yesterday afternoon.
Since the market close on Friday, January 27, the price of the world’s largest cryptocurrency, Bitcoin (BTC 1.08%), traded roughly 2.7% higher at 11:35 a.m. ET on Thursday and hovered around $23,800. Meanwhile, altcoin Litecoin (LTC 2.96%) traded more than 13% higher across the same period, while meme token Dogecoin (DOGE -0.75%) was up more than 7%.
The Fed at the end of its meeting yesterday raised its benchmark overnight borrowing rate by another quarter point, bringing the federal funds rate to inside a range of 4.5% to 4.75%. It’s the smallest hike the Fed has done in almost a year.
Fed Chair Jerome Powell also made comments in line with the market’s expectations that the Fed is still planning to conduct ongoing rate hikes and is more focused on the agency’s long-term inflation expectations. But Powell did acknowledge that there are signs of inflation easing.
Rising rates and a strong U.S. dollar have been two of the larger inhibitors for Bitcoin and the rest of the crypto market. Rising rates make safer assets more attractive because they will yield more, which encourages traders to ditch riskier assets. Cryptocurrencies are some of the riskiest assets because they are hard to value.
The strength of the U.S. dollar, which creates a negative environment for stocks and crypto, hit a 20-year high last year, but the U.S. dollar has been falling and experts see potentially more room to fall.
Dogecoin has also been rallying this week after Twitter CEO Elon Musk revealed his plans to add a payments component to the social media platform. While the system will primarily be for fiat currencies like the U.S. dollar, Musk has also discussed eventually adding a crypto component.
Musk has been a longtime Dogecoin supporter and previously said it’s one of three cryptocurrencies he owns. Furthermore, his electric car company, Tesla, also still accepts Dogecoin as payment. Musk has the ability to move the price of Dogecoin, so any time he talks about adding crypto capabilities, Dogecoin will likely benefit.
The crypto market is clearly rallying on the hopes that the Fed is close to an end with its rate-hiking campaign and I think many investors see strong potential for a soft landing or for a mild recession that leads the Fed to actually cut interest rates. A rate cut would really help stocks and crypto.
I still would like to see the crypto market get past the FTX bankruptcy and some of the contagion it has spread, which has really caused a broader lack of confidence in the industry.
Long-term, I like Bitcoin. While I do hold a very small position in Litecoin from a while back, I am not terribly interested in the token or Dogecoin.
Editor’s note: An earlier version of this article said that these price moves happened overnight. The time period has been corrected and price moves were updated.