August 21, 2023: On Thursday, Cryptocurrencies were under pressure as investors grappled with continued concerns about the U.S. economy.
According to Coin Metrics, Bitcoin was lower by about 4% at $27,901.60. The slide started after the Federal Reserve’s July policy meeting minutes were released on Wednesday.
In the minutes, they warned that Fed officials see “upside risks” to inflation that could lead to more rate hikes. At that meeting, Fed raised its benchmark interest rate to the highest in more than 22 years. Markets have been gambling the central bank wouldn’t make any more moves on interest rates this year. In reaction, the stock market decreased for a second straight Wednesday, and the 10-year U.S. Treasury yield hit its highest close since 2008.
According to Coin Metrics, Bitcoin’s correlation with stocks is at its lowest level in two years, but in 2022 it shot to an all-time high in response to the Fed’s rate-hiking campaign to tame inflation.
“Although inflation in itself could be an argument for growth in crypto assets, with inflation comes other aspects like risk-off appetite from investors fearing a recession and avoiding what bitcoin is deemed to be riskier assets,” said Sylvia Jablonski, chief investment officer at Defiance ETFs.
“I suspect that the higher beta equities and crypto are the victims of the end of summer lag, range-bound trading, no volume, which is typical in August with the hawkish Fed as the cherry on top to keep investors to the side and prices in this tight range,” Jablonski said.
Bitcoin and ether’s 90-day volatility declined to multiyear lows at 35% and 37% this week, respectively, according to Kaiko.
Needham’s John Todaro added that Bitcoin’s move back to $30,000 in late June “had been on light volume, so that rally has not had a ton of strength.” He added that the eventual debut of a spot bitcoin ETF, one of crypto’s biggest positive catalysts, also lost some steam this week.
“With a U.S. ETF likely not seeing a near-term decision given the setback this week and expectations for higher rates for longer, bitcoin and crypto broadly are pulling back,” he said. “Remaining catalysts are Halving anticipations in Q1-Q2 ’24 and any on-going ETF related comments from the SEC.”
On Thursday, several top crypto assets by market cap, including Binance’s BNB coin, Ripple’s XRP, and the Solana and polygon coins, were lower by more than 3%. Ether decreased by 4%.
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