Bitcoin and Ethereum experienced slight declines in anticipation of the Federal Reserve raising interest rates in its upcoming meeting.
At the time of writing this post, Bitcoin, the largest crypto asset by market cap is exchanging hands at $22,934, which fell by over 2% in the past 24 hours, according to Coinmarketcap.
Ethereum, the second biggest cryptocurrency, has fallen by 2% to trade at $1,573 at press time.
The Federal Reserve’s policy meeting this week, where the top bank is scheduled to announce its eighth consecutive rate hike, is one of the most eagerly awaited events.
As reported by CNBC, Fed officials are expected to approve a 0.25 percentage point hike this time around as inflation begins to decline, a more moderate pace than the previous super-sized movements in 2022.
“The good news is that the worst is over,” stated Yiming Ma, an assistant professor of finance at Columbia University Business School.
The U.S. central bank is now knee-deep in a rate hike cycle that has raised its benchmark rate by 4.25 percentage points in less than a year.
Although inflation is still above the Fed’s 2% long-term target, pricing pressures have “come down substantially and the pace of rate hikes is going to slow,” Ma said.
As for the world’s dominant crypto, Bitcoin witnessed its best month in over a year, tapping a five-month high of $23k recently.
Its YTD price has also been impressive, registering over a 43% surge, the strongest monthly performance since October 2021, according to a recent Glassnode research report.
Bitcoin’s “Impressive” YTD Performance Could Get Invalidated Due To This
The on-chain analysis indicated that Bitcoin’s surge has been propelled by historical spot demand and a string of short squeezes, which have helped the market turn a profit and create a robust contango in futures trading.
In addition to that, Exchange outflows in the wake of FTX have been neutralized by newly motivated inflows, which have tempered the initial impulse.
Three waves of short futures contracts totaling more than $495 million have been liquidated, with the initial short squeeze in mid-January catching many traders off guard, TronWeekly reported.
However, despite the promising signs, the overall crypto industry could face a major setback with the Fed introducing more hawkish measures impacting the traditional and cryptocurrency markets.
This was corroborated by Michael J. Kramer – founder of Mott Capital in his report released on January 29 where he suggested that the FED needs to “push back against the market before it’s too late.”