Crypto market sees gains following Fed’s interest rate hike

The crypto market saw gains following the Federal Reserve’s announcement of another interest rate hike by 75 basis points on Wednesday.

Bitcoin reached a trading point of $20,650 per unit, with a one percent daily increase. In the past seven days, Bitcoin has recorded a 2.1 percent gain. Ethereum, the second biggest cryptocurrency after Bitcoin, traded at around $1,600 or rising 1.3 percent in the last 24 hours. Ethereum’s price has increased by 8.4 percent in the past week.

Altcoins like DOGE, Solana, Cardano and Polygon also briefly entered the green territory. DOGE’s price went up 106 percent in the past week after billionaire Elon Musk acquired Twitter. All coins have retraced back to their regular pricing for the week.

Analysts explained that the rally in the crypto market displayed investors’ increased confidence in the market situation. In Bitcoin’s case, if the Fed decides to loosen its policy, its price will rise. Even at its current rate, Bitcoin’s price movement already stimulates a wave of liquidations. On October 25, a $704 million liquidation of cross-crypto shorts pushed Bitcoin’s price above the $20,000 mark.

Analysts argued that the recent growth in the crypto market might be a sign of an impending broad recovery. In recent months, data also indicated that long-term crypto investors still retain profit despite the bearish market situation. Increased investors’ confidence is also supported by the growth in the traditional stock market, given that several major indices have displayed a high correlation.

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The crypto market, however, will face a significant challenge if the Fed decides to remain hawkish in the following months. OANDA market analyst Edward Moya said the U.S. economy did not slow down “quickly enough” to warrant a more lax policy.

Unlike the crypto market, the traditional stock market ended the trading day lower on Wednesday. The Dow Jones fell by 1.6 percent, the S&P 500 slid by 2.5 percent and the Nasdaq Composite slipped by 3.4 percent.

The stock market rallied briefly earlier in the day but then dipped following Fed chief Jerome Powell’s statement regarding pausing interest rate hike being “premature.” The dip in the stock market came with mixed results in Q3 earnings reports.

Match Group—the parent company of Tinder, Hinge and OkCupid—reported higher-than-expected revenue in Q3. Its share went up 4.2 percent following its pledge to cut operational costs. Mondelez International also displayed higher than-projected earnings in Q3 and even increased its annual earning projection, which advanced its shares by 1.2 percent.

Airbnb’s shares dropped 13.4 percent following poor Q3 revenue and slower growth projection in Q4. Estée Lauder also saw more than an eight percent drop in shares following its cut on the 2022 revenue.

Fed’s policy stance

Although earlier economists predicted that the Fed would eventually slow down its aggressive rate hikes, Powell’s statement during the press conference signaled that further consideration was needed to decide on the next hike size.

“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” Fed’s press release said.

Analysts said that despite some areas in the market showing signs of a slowdown, the Fed’s criteria had yet to be fulfilled. Recent economic data showed that job openings in the private sector unexpectedly increased last month. Core inflation data did not show signs of going down as well.