Correlation between crypto market and Fed rates

The crypto market seems to have already discounted an aggressive monetary policy including the upcoming July and September rate hikes by the Fed.

Crypto are affected by the Fed’s rate decisions

With sessions remaining highly volatile and Asia starting to feel major crunches, the performance of the world’s stock markets seems more worrying than the performance of the crypto world. 

According to a Reuters report, the still relatively young asset seems to have already factored in the fact that the Fed will continue throughout the year with an aggressive monetary policy aimed at fighting inflation. 

The rate hikes applied so far have already been discounted with no little damage. 

The loss of 70% of Bitcoin’s value and the crashing through the $20,000 mark was a major blow. Other digital currencies also behaved similarly, with Ethereum breaking through the $1,000 mark on the downside.

However, the asset class seems to have stomached the choices made by Powell and co. and despite expecting similar rate hikes of 75bp and 50bp for July and September respectively, there’s not much to worry about. 

There is even less concern about the moves of the ECB.

Christine Lagarde seems not to be playing the game as she has much bigger problems to deal with. While the US economy has problems, the European economy certainly has a more serious situation. 

The debt of the so-called PIGS (Portugal, Italy, Greece and Spain) is of great concern to Brussels, especially that of the “Bel Paese”, which has risen to 2700 billion to date. 

Christine Lagarde does everything to protect Europe

Almost one-third of the debt is composed of Italian bonds held by the European Central Bank and this worries President Lagarde. Indeed, she has set her team to work on a sort of anti-spread shield to protect the most fragile countries from default, which, like a domino, would also destroy the European Union. 

This sort of “Whatever it takes 2.0” should be launched in the next few days and is the only noteworthy news the markets are waiting for from the old continent. 

From a long-term perspective, with markets in turmoil and an uncertain future, there are less painful strategies than others. 

Again according to Reuters, one of these could be DCA strategy, i.e. buying fractionally over time so as not to move capital into a single position and risk missing the timing. 

This operation makes it possible to protect oneself in the long term and, in a bear market such as the one we are seeing today, potentially to earn something without risking too much.