December 8, 2022


Cryptocurrencies came under pressure on Wednesday after the Federal Reserve announced another major interest rate hike and to warn Economic pain from aggressive policy tightening is yet to come.

Bitcoin, the largest token, fell as much as 4% and fell dangerously below $18,000, within touching distance of levels last seen in 2020. The second-largest coin, Ether, continued to underperform, falling as much as 7.2%.

The Fed’s determination to raise inflation to levels that are at the expense of sliding asset prices has sent a chill across global markets. Short-maturity Treasury yields jumped while longer-term rates fell, deepening a bond curve inversion seen as a harbinger of recession.

Such a background gives little leeway for the crypto market. They were already reeling from a $2-trillion plunge from a 2021 record high, an exposed pockmark with blowups like the Three Arrows Capital hedge fund and the Terraform Labs project — whose co-founder, Do Kwon, is wanted by authorities.

“If the Fed continues to tighten, unless it implements yield curve controls to keep the curve positively sloped, the crypto system will see a lot more failure,” said Brian Pellegrini, founder of Intertemporal Economics. “Eventually some very rich champions will emerge, but in the meantime there will be blood in the streets.”

The MVIS CryptoCompare Digital Assets 100 Index fell this week, taking its losses for 2022 to around 62%, compared to 22% for global stocks. The correlation between equities and Bitcoin is elevated and near a record, a sign of how assets are being tossed around by common macro factors.

JPMorgan Chase & Co. Its chief executive Jamie Dimon didn’t help the digital-asset market’s mood by reaffirming it skepticism and calling tokens “decentralized ponzi schemes”.

Bitcoin was around $18,670 as of 9:50 p.m. in Los Angeles. Ether was around $1,260 and is set to take an additional hit as an earlier rally sparked by hype around its Ethereum network upgrade. Coins like solana and snow were also in red.

Some traders may look to metrics like Bitcoin’s 14-day relative strength indicator to see if a bounce is possible. RSI, a momentum gauge, is near oversold levels. But after the Fed’s dismal performance, the opposite bet has been seen for risk assets.

— Bloomberg writer Carly Wana contributed to this report.



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