With the coming of new year, financial markets around the world started showing gradual upward movements. This includes the crypto market as well, where the global crypto market capitalization crossed the 1 trillion USD mark after so long. Major cryptocurrencies Bitcoin (BTC) and Ethereum (ETH) were also ahead in the recent rally. However, this run halted starting this week anticipating major risk events as the US Federal Reserve announced an interest rate hike.
The broader crypto market dropped by up to 3.68% on Monday and the market cap reached 1.04 trillion USD. Bitcoin (BTC) went below 23,000 USD and Ethereum (ETH) traded around 1,560 USD. The overall crypto market went through similar situations except for some like the popular meme coin, Dogecoin (DOGE) which traded around 0.091 USD.
DOGE enjoyed the optimism brought after the report that Tesla and Twitter CEO Elon Musk is likely to bring payment regime over the recently acquired social media platform. The meme coin community is bullish on expecting that Dogecoin could be chosen as a potential payment option, though no official announcement of the same has been disclosed yet.
In addition to the skepticism within the financial markets after the Fed’s interest rate hike, fourth-quarter earning reports of Apple and Meta like giant companies also affected the market activities. This led to the US equity market closing low.
S&P 500 dropped 1.3% over the day, tech-heavy NASDAQ lost 1.9% of its value while Dow Jones Industrial Average (DJIA) shed by 0.7%.
The recent instance added as the other one proving both the stock market and cryptocurrency market going parallel to each other whether it’s going up or down.
Analysts believe the drops came in the wake of defensive moves of market players despite the expectations that interest rate hikes are not going to be on higher sides, asthey were around 75 basis points during last year which later dropped to 50 basis points. However, this time it is expected to go even lower to 25 basis points only with the expectations that the hikes are not going to halt in the near future considering it as a potential move to curb inflation.
Increasing the interest rates by the US central bank acted as one of the crucial catalysts to slow down the market activities. Last year, the instance took place about seven times. Every time it happened, the market experienced a bump. Given the macroeconomic conditions getting back on track, the markets are likely to react positively and the journey ahead will be relatively smooth.
Source: https://www.thecoinrepublic.com/2023/02/01/bitcoin-ethereum-and-equity-markets-drop-as-fed-likely-to-hike-interest-rate/