Good morning. Here's what happened:
Prices: Cryptos rise after Fed rate hike.
Insights: bitcoin and other cryptocurrencies show the impact of events in Asia.
Technician's take: expect abrupt price moves within the current trading range.
PricesBitcoin
(BTC): $39,644 +5%
.Ether (ETH): $2,946 +6%
Biggest Winners
| Asset | Ticker | Income | DACS Sector |
|---|---|---|---|
| Ethereum Classic | ETC | +17.8% | Smart contracts platform |
| Cardano | ADA | +16.4% | Platform for smart contracts |
| Cosmos | ATOM | +13.0% | Platform for smart contracts |
Losers
There are no losers today in CoinDesk 20.MarketsS&P500
: 4,300 +2.9%
DJIA: 34,061 +2.8%
Nasdaq: 12,964 +3.1%
Gold: $1,881 +0.6%
Cryptocurrencies rise after Fed rate hike
And on the fourth day of May, there was sunshine for Bitcoin and other cryptocurrencies.
The largest cryptocurrency by market cap recently traded at around $39,600, up over 5%. Ether, the second largest cryptocurrency by market cap, changed hands at $2,930, up 6%. Other major cryptocurrencies were even more in the green, with ADA and AVAX rising over 16% and 11%, respectively, and SOL jumping 8%.
The surge in cryptocurrencies, which broke a nearly week-long slump, followed the long-awaited half-point interest rate hike by the Federal Reserve, the most important move so far this year in its effort to curb rising inflation. The Fed also announced that it would reduce its $9 trillion portfolio of mortgages and government bonds. Other central banks have also raised interest rates in recent months, although not as aggressively.
Investors feared the Fed's newfound hawkishness would plunge the economy into recession. The rate hike was the largest since the bank raised them by half a point in 2000.
Growth has already slowed in the first half of the year. U.S. gross domestic product fell 1.4% on an annualized basis in the first quarter. In remarks Wednesday, however, Fed Chairman Jerome Powell hinted that the Fed could reduce the monetary stimulus that fueled the country's strong growth last year while ensuring a soft economic landing that would reassure investors. Powell called the economy strong, underscored by recent strong employment numbers, and ruled out major rate hikes, boosting equity markets.
The technology-heavy Nasdaq rose more than 3%, and the S&P 500 and Dow Jones Industrial Average gained almost as much.
Despite Wednesday's surge, bitcoin has been in the doldrums since 2022, falling 17% in April alone. May, a historically strong month for cryptocurrencies, had shown little momentum so far as investors continued to digest a toxic combination of falling economic indicators and global uncertainty, fueled in large part by Russia's unprovoked invasion of Ukraine.
Dan Young, head of partnerships at blockchain analytics firm Elementus, pointed to persistent concerns about inflation, disappointing rates of crypto adoption, particularly in El Salvador, which made bitcoin legal tender last year, and "high-profile protocol breaches that have highlighted vulnerabilities and increased regulatory scrutiny of miners." Still, Young said, "the space has proven to be incredibly resilient."
"That resilience is what keeps cryptocurrencies rising, as we saw today with the 6% rise (at the time)," he said, adding, "This continues to be an incredibly volatile, emerging asset class where conventional notions of market sentiment are constantly being turned on their head.
As long ascryptocurrency remains resilient in the face of hacks, monetary and political tailwinds, it will continue to soar, especially given the billions in institutional capital."
InsightsAsianTailwinds
for Bitcoin
Over the past two months, crypto investors have focused on central bank rate hikes and the economic fallout from Russia's invasion of Ukraine, limiting their exposure to cryptocurrencies and driving up prices.
But recent events in Asia and other parts of the world have also weighed on the markets. They are the latest evidence that cryptocurrencies are a complex organism that is global in nature and subject to the same problems and events that affect other assets. Cryptocurrencies are not in a bubble, despite the claims of their most ardent advocates.
Consider last week's events in the Asia-Pacific region, which helped keep bitcoin in a range between support at $37,000 and resistance just below $40,000. The choppy performance of cryptocurrencies follows a similar fluctuation in the prices of major Asian equity markets.
The inertia in these assets is due to the ongoing draconian coronavirus-related lockdowns by the Chinese government that have hurt growth, as well as a record April heat wave in India that could hamper the country's vital agricultural exports.
Meanwhile, according to a recent report in the Economic Times, the Indian tax authority is trying to get more money from the growing number of crypto investors in the country. Citing two unnamed sources, the Economic Times said the authority could collect up to 20% in withholding taxes (TDS) on interest earned by India residents on foreign platforms.
TDS is an income tax on money paid at the time of a transaction and also applies to the companies making those payments. TDS on crypto transactions is currently 1% and is part of a new crypto tax law that takes effect July 1.
An April finance law introduced a 30% tax on income or gains earned by Indians from cryptocurrency investments. Trading volumes on the country's exchanges have since plunged by about 70% in the past month.
Additional taxes on passive investments could trigger further capital flight from exchanges. Some Indian entrepreneurs, like the two founders of crypto exchange WazirX, have already moved their families to Dubai, possibly because of the friendlier crypto regulations.
Thecompanywill maintain its official headquarters in Mumbai, but WazirX said in a statement that it wants to "allow all employees of the company to work from anywhere, provided they find it convenient and comfortable, unless they are required to travel officially
.Bitcoin (BTC) reversed a short-term downtrend on intraday charts, albeit within a three-month trading range. Into the Asian session, price action could be choppy as buyers attempt to defend support at $37,500 before sell orders near the $40,000-$43,000 resistance zone.
However, despite the potential for intraday price action, upside potential appears limited. For example, there is a loss of upside momentum on the weekly chart, similar to November when a price decline preceded it.
This time, however, the weekly chart is not overbought. This means that BTC's current price range could continue until a decisive breakout above $46,000 or a break below $30,000 occurs.
The Relative Strength Index (RSI) on the daily chart is hovering near the oversold zone, which could keep short-term buyers active, especially if momentum signals improve.
Key EventsBlockedEarnings
for the first quarter of 2022
.9:30am HKT/SGT(1:30am UTC): Australian Imports/Exports (March MoM).
7 p.m. HKT/SGT(11 a.m. UTC): Bank of England Monetary Policy ReportCoinDeskTVIn
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Said and Heard
"In a remarkable span of time, Taiwan went 200 days without a COVID-19 case or China-style blocking. The secret recipe? Thanks to privacy-friendly encryption, citizens were able to scan QR codes and "check in" at every restaurant, store, bar and cafe. They did so without revealing their personal information. This worked so well that Taiwan reduced the contract tracking cycle to an astonishing 24 minutes." (CoinDesk contributor Jeff Wilser) ... "Yuga Labs, for the uninitiated, is the company behind the Bored Ape Yacht Club, which remains the most valuable [non-fungible token] collection in the crypto ecosystem. The company didn't even have to say what it planned to do with the money when it announced the sale of the Otherside property; the fact that it's near the Bored Apes was more than enough reason for investors to jump in. And they did, despite a number of systemic flaws." (CoinDesk media and culture reporter Will Gottsegen) ... "There is little sign of a slowdown in the largest job seeker market ever. As companies continue to face high turnover and the gap between labor demand and supply widens even further, companies will continue to face upward pressure on wages." (Julia Pollak, chief economist at ZipRecruiter, in The Wall Street Journal)