‘Bullish rate hike’ — Why Cryptocurrencies Spiked in the Face of Bad News
The Cryptocurrency Markets have been going up ever since the FED announced a 75-basis point interest rate hike in the United States, with analysts explaining that the Crypto Markets may have been initially bracing for much worse.
On 27th July, Bitcoin (BTC) price surged by around 8% to the mid $22,500 mark following the Federal Open Markets Committee (FOMC) decision to raise interest rates yet again. Many other top Digital Currency and Assets surged in value as well, with Ethereum (ETH), Polkadot (DOT) and Polygon (MATIC) all seeing notable percentage hike in double-digit gains.
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Mati Greenspan, founder and CEO of Quantum Economics on Wednesday jokingly questioned on Twitter whether this was a “bullish rate hike”.
Greenspan, speaking with Cointelegraph, noted that investors were evidently expecting worse and said that this bounce is nothing out of the ordinary:
“Markets love going up on Fed announcement days, even when their decision is to be tough. Jerome Powell is particularly skilled at delivering bad news. Clearly investors were expecting worse.”
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The Fed is attempts to reel inflation in by increasing interest rates are usually associated with a pullback of investment activity across different asset markets.
However, there are mixed opinions among the Crypto community about whether the latest pump will have enough momentum to sustain upward or if there is a significant retracement on the cards before the market starts to recover.
Pav Hundal, an analyst at Cryptocurrency Exchange Swyftx, told Cointelegraph that he was “surprised at the exuberance of the reaction to yesterday’s rate hike,” as the underlying macroeconomic landscape still seems up in the air:
“The Fed is saying entirely different thing and the markets seem to be hearing and interpreting something else every time we see interest rate hikes. In June, it was the Fed suggesting large rate hikes would be ‘uncommon,’ this time around its Jerome Powell hinting that the pace of increase might ‘slow.”
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He further added that “The best measure of what’s to come is the underlying macro-economic data and for now at least, it does look like some inflationary pressures are easing, with crude prices falling alongside futures prices for staples like corn and wheat, as well as some logistics costs,” he added.
Hundal went on to say that Swyftx saw a 100% increase in early trading surrounding the news, indicating that “there is clearly a lot of people who see value in the current market prices.”
The analyst highlighted that a broader bullish or bearish trend will not likely become ostensible until the U.S. announces important data relating to the performance of its Gross Domestic Product (GDP) in the coming days, which could signal whether the country is officially in recession or not:
“The good news is we are not going to have to wait too long to see what happens to the Cryptocurrency Market when any initial volatility washes out. The U.S. is about to announce its quarterly GDP data and that’s going to be a big stress test. Any negative sentiment here or there could wipe out recent gains.”
“But if the macroeconomic landscape starts to show signs of resilience, we could see the Cryptocurrency Market capitalization stabilize at the $1 trillion point and rally from there,” he added.
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