Markets
US$200 million liquidated in frantic liquidation
In a move that left traditional and crypto markets in disarray, the Federal Open Market Committee (FOMC) held its fourth policy meeting of the year on June 12 and decided keep interest rates stable in the current range of 5.25% to 5.5%.
Bitcoin, Churning Ether
This unexpected stability triggered a strong reaction in the crypto world, with Bitcoin price plummeting from $70,000 to $66,000 and Ethereum experiencing a similar downturn. The FOMC’s reluctance to cut rates despite previous indications of multiple reductions has amplified volatility, leading to nearly $400 million in liquidations and shaking investor confidence at all levels.
Federal Reserve Chairman Jerome Powell emphasized that although there has been “considerable progress” in combating inflation, the central bank is not ready to ease its restrictive monetary policy. Powell’s aggressive stance underscores the Fed’s commitment to its 2% inflation target, suggesting that premature rate cuts could undermine the progress made so far.
Ether down in the last 24 hours. Source: Coingecko
Crypto Markets Feel the FOMC Squeeze
The FOMC decision and Powell’s subsequent comments had an immediate and dramatic impact on the crypto markets. Bitcoin, which soared to a staggering $70,500 on Tuesday, plummeted to $67,220 following the announcement.
Ethereum followed a similar trajectory, dropping from over $3,700 to $3,400. The recession was not limited to these two giants; altcoins like Cardano, Solana and Ripple have suffered drops of at least 8% each.
BTCUSD trading at $67,411 on the 24-hour chart: TradingView.com
In the wake of these fluctuations, nearly $400 million worth of crypto assets have been liquidated over the past two days. This wave of liquidations highlights the high volatility and investor anxiety that permeates the market. Worsening the situation even further, US spot Bitcoin ETFs recorded net outflows of 200 million dollars, breaking a 19-day streak of net inflows.
Despite a brief moment of optimism following the release of the US Consumer Price Index (IPC) report– which showed an annual inflation rate of 3.3% in May, slightly lower than the 3.4% predicted – the crypto market quickly returned to its initial levels. This reaction highlights a persistent lack of investor confidence in a context of current economic uncertainty.
Bitcoin plummets in the last week. Source: Coingecko
Global economic strategies diverge
While the US maintains a firm stance against premature rate cuts, other economic blocs are taking different approaches. The European Union and Canada, both grappling with their own inflationary pressures, have chosen to implement rate cuts this year. These divergent strategies reflect different economic conditions and political preferences in different regions.
Back in the US, a survey supported by Grayscale reveals that 41% of voters are paying more attention to Bitcoin due to the country’s persistent inflation. This growing interest in cryptocurrencies highlights the growing public scrutiny of traditional economic policies and the search for alternative investment opportunities in an environment of high inflation.
Kiplinger Featured Image, TradingView Chart