Crypto Market Response to the Fed’s Decision
In an unexpected turn of events, the cryptocurrency market witnessed a significant decline, dipping by more than 3% even after the U.S. Federal Reserve (Fed) decided to maintain the existing interest rate levels for the first time in a year. As per blockchain intelligence firm Santiment, the prices of cryptocurrencies, including Ethereum (ETH), fell contrary to expectations post-announcement.
Santiment’s report suggests that the movement of a substantial amount of older ETH tokens was recorded before the Fed’s announcement, indicating that institutions may have been anticipating the move. The ‘age consumed’ of ETH, a metric reflecting the movement of old coins in circulation, hit an 11-month peak just prior to the major altcoin’s price decrease, implying that institutional whales might have sold off a portion of their ETH.
Implications of the Fed’s Decision on the Crypto Market
The decision by the Fed to keep interest rates steady can potentially benefit the crypto market in several ways. Primarily, it can lead to heightened liquidity in the financial system as low interest rates can stimulate borrowing and expenditure. This surplus liquidity could potentially be directed towards cryptocurrencies, thereby enhancing demand and pushing up prices.
Secondly, traditional investment avenues may yield lower returns due to unchanged interest rates, making cryptocurrencies an appealing alternative for investors seeking higher profits. As a result, investors might consider diversifying their portfolios by allocating funds towards cryptocurrencies.
Effects on Crypto Market Capitalization and Major Cryptocurrencies
However, the recent decision from the Fed, although promising for the crypto market, coincided with a 3.29% drop in global crypto market cap within the last 24 hours. Consequently, the total market cap stands at $1.02 trillion at press time.
Furthermore, the prices of market leaders Bitcoin (BTC) and ETH witnessed a decrease in the past 24 hours. BTC was trading at $24,942.80 following a 3.58% decrease, while ETH’s price fell by 5.62% to $1,641.32 over the same period. This downturn affected their weekly performances as well, with BTC and ETH recording losses of 5% and 10.54% respectively over the past week.
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