Week Ahead: Fed supersized rate hike triggers selloff of crypto assets
Despite the intense downward pressure, BTC was under pressure during the week but held above the $20K price level. In weekend trading, BTC fell below $20K, and ETH broke the $1K support, both down to December 2020 levels.
US stocks were dragged lower after the Fed hiked interest rates by 75 bp after a stronger than expected inflation print last week. Fed members are ready to keep lifting rates with another 75 bp rate hike still on the table to reign back inflation.
Monetary policy tightening triggered risk aversion leading to a selloff in riskier assets, with US stocks having the worst week since the onset of the pandemic and BTC and ETH falling more than 25%. BTC has fared better as it acts as a safe haven compared to other crypto assets. ETH defended the $1K price level and could be close to the end of its capitulation phase. Galaxy Holdings CEO Mike Novogratz said cryptocurrencies are closer to the bottom than US equities.
Coinbase announced it would lay off 18% of its workforce, joining Gemini Trust and BlockFi, citing the crypto winter as the reason. Binance is an outlier as it announced hiring for 2K positions. Binance said that volumes in 2022 have been similar to 2021, with $120B traded on June 15.
Microstrategy in focus as the company faces a margin call as BTC broke through the $21K price level. Still, a spokesperson had noted contributions could be made to the collateral package. Three Arrows Capital confirmed heavy losses and failed to meet lender margin calls. Crypto traders warned about aggressive strategies and more traders looking for arbitrage and liquidation fee opportunities from sophisticated hedge funds. FTX entered into an agreement to purchase Canadian crypto platform Bitvo, with the deal expected to close in Q3.
Regulators in several US states are investigating Celsius for its decision to suspend withdrawals. Crypto executives said some of the blame lies on regulators that failed to provide clarity, and current events will accelerate better policies.
The central bank of Israel and the Monetary Authority of Singapore are teaming up with the Bank of International Settlements to test the feasibility of a CBDC with the finding to be published at the end of this year.