Cryptos Wait For The Fed; Will The Fed Pivot Soon?

Crypto market capitalization decreased 1.6 percent overnight amidst an anxious wait to the Fed’s monetary policy decision and forward guidance due later on Wednesday. Whilst markets appear to have more or less priced in a 75-basis points hike now and speculate on slower hikes going forward, the moot question is whether a policy stance pivot by the Fed is close indeed.

In the Summary of Economic Projections issued in September 2022, the Fed had projected inflation falling to 5.4% by 2022, to 2.8% by 2023, to 2.3% by 2024 and to 2% by 2025. While making the projection, the most recent inflation reading was 8.3%, pertaining to August 2022. Though CPI dropped to 8.2% by September, it is still above the Fed’s year-end projection. The CPI data for October is due on November 10.

The Summary of Economic Projections also projected median year-end federal funds rate of 4.4% by 2022, rising to 4.6% by 2023, and thereafter reducing to 3.9% by 2024 and to 2.9% by 2025. Currently the Federal Funds Rate is 3.25%, following the 25-basis points increase in March, 50-basis points addition in May and the 75-basis points-hikes, each in June, July and September. So even if the Fed delivers a 75-basis points hike now and a 50-basis points hike in December, it is doubtful whether it can be termed a pivot.

The American economy grew at an annualized 2.6% on quarter in the three months ended September, rebounding from a contraction in the first half of the year. The S&P Global US Manufacturing PMI stood at 50.4 in October of 2022, that still indicated a growth in factory activity, albeit lower than 52 recorded in the previous month. The unemployment rate edged down to 3.5 percent in September 2022, matching July’s 29-month low. A pronounced weakness in economic growth, or a noticeable slump in the job markets are therefore not obvious at this point in time.

Interest rate increases reflect on purchasing power and inflation rates with a lag, which the Fed knows more than anyone else. Even if the Fed is currently getting ready for an eventual policy shift, it is likely to hesitate to reveal it at this stage. A significant toning down of the Fed’s policy rhetoric that could imply a shift in stance therefore appears a bit unlikely at this juncture. The lull in the crypto markets appears to be in tandem with this sentiment of caution.

Overall crypto market capitalization is currently at $1 trillion versus $1.02 trillion a day earlier.

Bitcoin is trading at $20,418.95, down 0.55 percent on an overnight basis and 0.66 percent on a weekly basis. BTC traded between $20,545.35 and $20.359.85 in the past 24 hours.

Ethereum is trading 2.3 percent lower on an overnight basis at $1,556.48. Gains made in the past week however exceed 2.2 percent. Ethereum’s trading range in the past 24 hours was between $1,595.51 and $1,544.08.

4th ranked BNB (BNB) traded between $327.57 and $316.28 in the past 24 hours. It has shed more than half a percent overnight.

6th ranked XRP (XRP) declined 0.7 percent in the past 24 hours and 1.8 percent in the past week.

8th ranked Dogecoin (DOGE) plunged 7.5 percent overnight but is still holding on to gains of 95 percent in the past week.

9th ranked Cardano (ADA) erased more than 3 percent whereas 10th ranked Solana (SOL) shed more than 4 percent in the past 24 hours.

Meanwhile, Netherlands-based cryptocurrency exchange Deribit has tweeted that its hot wallet was hacked for $28 million on November 1. The hack involved the BTC, ETH and USDC hot wallets. It added that client funds were safe, and that the loss was covered by company reserves. It also reported that client assets, fireblocks or cold storage addresses have not been affected. The exchange added that it was the company policy to keep 99 percent of user funds in cold wallets to limit the impact of these type of events.

MoneyGram International, Inc., a global player in digital P2P payments, on Tuesday announced the launch of a new service enabling consumers to buy, sell and hold cryptocurrency via the MoneyGram mobile app. The new and innovative feature would give MoneyGram customers in nearly all U.S. states and the District of Columbia the ability to trade and store Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC) by using the company’s leading mobile app, it said.

At current levels of market capitalization, Bitcoin commands 38.9 percent of the overall crypto market, closely followed by Ethereum which enjoys a market share of 18.9 percent. Stablecoins account for 14.6 percent of the overall crypto market, leaving a share of 27.6 percent for the residual altcoins.

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