The bitcoin (BTC) and broader crypto market failed to recover higher and returned to the selloff on Thursday, after a brief rally following the US Federal Reserve’s (Fed) announcement on Wednesday that it had raised rates by 75 basis points, its largest rate hike since 1994.
At 14:48 UTC, bitcoin stood at USD 21,000, down over 1% for the past 24 hours and 31% for the past 7 days. At the same time, ethereum (ETH) was almost unchanged in a day and down 39% for the week to USD 1,105.
BTC past 14 days:
The losses on Thursday came after a brief relief rally in both BTC and ETH Wednesday, as market participants digested a largely expected 75-point rate hike from the Fed.
From a low of USD 20,111 on Wednesday morning UTC time, BTC rose more than 12% to reach close to USD 23,000 before once again giving back most of the gains. A similar story also played out in the ETH market, with the token climbing from a low of USD 1,014 in the morning to more than USD 1,250 shortly after Fed Chair Jerome Powell had wrapped up his press conference – a rally of more than 20%.
Will USD 20,000 hold?
According to Mikkel Morch, Executive Director at crypto hedge fund ARK36, the old mantra of ‘don’t fight the Fed’ has never been more relevant than in recent days, with fears about rate hikes largely responsible for driving down crypto prices.
Still, Morch noted that it appears that last week’s high inflation reading for May in the US, combined with recent comments from the Fed, had already spooked investors so much that the 75-basis point hike was largely priced in by the time it was announced.
“It now appears that we can expect the bitcoin price to hold the USD 20K level,” he said in an emailed comment, adding that it will likely “consolidate there for the foreseeable future and maybe even tag the 24K resistance […].”
“The USD 12K scenario that many called for seems to have been invalidated for the time being,” Morch said.
Similarly, Marcus Sotiriou, an analyst at crypto broker GlobalBlock, said in a commentary that Wednesday’s brief bitcoin rally following the rate announcement came because traders were already prepared for the hike.
However, he added that the market has “cooled off slightly” since, and warned that there “could be more downside ahead over the next few months” if the rate hikes end up causing a recession.
“A recession would form a macro environment that is poor for global markets, specifically crypto. As people have less money to spend on essential items, they may have less capital to invest in risk-on assets like crypto and equities,” Sotiriou wrote.
Analysts looking for a bounce
Meanwhile, many of the leading voices in the crypto community on Twitter shared cautiously optimistic takes after Wednesday’s rate hike.
Among them was Ryan Selkis, founder of crypto analytics platform Messari, who said he thinks the “bottom might be in.” He explained that even though the Fed was “aggressive,” the hikes “won’t be enough, and they can’t go too aggressive or they’ll crush the economy and budget.”
“I think BTC is ahead of the general markets on trading around the Fed’s [quantitative easing/quantitative tightening] and inflation, and liquidations might be done,” Selkis wrote, adding that “we’ll see how strong support is at the 2017 highs.”
Similarly, veteran trader Peter Brandt wrote that the USD 20,000 level, which marked the high of the 2017 bull market, “could provide [a] relief rally” for bitcoin, although he appeared less optimistic about the longer-term outlook:
Meanwhile, and as bullish as always, was Michael Saylor, the CEO of business intelligence firm MicroStrategy, one of the world’s largest holders of BTC.
Speaking in an interview with CNBC after the rate hike, Saylor reiterated that he “can’t come up with a better idea” for investment than bitcoin.
“If your time horizon is one month, it looks like a volatile risk asset, but if your time horizon is 10 years, it looks like a risk-off store of value asset. The cross-over point is four years. Nobody has ever lost money investing in bitcoin for four years [or more],” the well-known bitcoin bull said.