FOMC Spooks Crypto: $400 Million Liquidated In Frantic Sell-Off

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As a researcher with a background in finance and experience observing the crypto markets, I find the recent FOMC decision and its aftermath to be both intriguing and concerning. The unexpected steadiness from the Fed has caused a significant ripple effect in the crypto world, resulting in steep declines for Bitcoin, Ethereum, and numerous altcoins.

At its fourth meeting of the year on June 12, the Federal Open Market Committee (FOMC) opted to maintain the existing interest rate range of 5.25% to 5.5%, a decision that has caused turbulence in both traditional and crypto financial markets.

Bitcoin, Ether Shaken

As a researcher studying the cryptocurrency market, I’ve noticed an unexpected stability that suddenly gave way to a sharp reaction. Bitcoin’s price dropped from $70,000 to $66,000, while Ethereum experienced a similar decline. The Federal Open Market Committee (FOMC) held back on rate cuts, despite earlier signals suggesting multiple reductions. This reluctance has intensified market volatility, resulting in approximately $400 million in liquidations and shaken investor confidence.

Jerome Powell, chair of the Federal Reserve, highlighted that significant strides have been made in combating inflation but stressed that the central bank is not yet prepared to loosen its stringent monetary policy. Powell’s firm stance reflects the Fed’s determination to maintain its 2% inflation objective, implying that early interest rate reductions could jeopardize the gains achieved thus far.

Crypto Markets Feel The FOMC Pinch 

The Federal Open Market Committee’s (FOMC) decision and Powell’s subsequent comments caused a significant and swift reaction in the crypto markets. Bitcoin, which had reached a peak of $70,500 on Tuesday, experienced a sharp decline to $67,220 after the announcement was made.

Ethereum, like the other two leading cryptocurrencies, experienced a significant decrease in value. Its price fell from around $3,700 to $3,400. This downturn wasn’t just confined to Ethereum; Cardano, Solana, and Ripple also faced declines of at least 8%.

FOMC Spooks Crypto: $400 Million Liquidated In Frantic Sell-Off

Over the past two days, I’ve witnessed nearly $400 million in crypto assets being sold off due to market fluctuations. This massive wave of liquidations underscores the heightened volatility and anxiety amongst investors currently dominating the market. To add fuel to the fire, US Bitcoin ETFs experienced net outflows totaling $200 million, ending a 19-day streak of continuous inflows.

After a fleeting sense of hope following the unveiling of the May Consumer Price Index (CPI) report, which indicated a yearly inflation rate decrease from 3.4% to 3.3%, the crypto market swiftly returned to its opening values. This response highlights the prevailing unease among investors, rooted in ongoing economic instability.

Global Economic Strategies Diverge

The US continues to hold a strong position against making early reductions in interest rates. In contrast, other economic alliances such as the European Union and Canada are pursuing different paths. Facing inflationary pressures within their respective economies, these countries have chosen to reduce interest rates this year. The diverse approaches adopted by various regions underscore the distinct economic circumstances and policy priorities that exist among them.

As an analyst, I’ve recently come across some intriguing data from a survey sponsored by Grayscale in the United States. The poll suggests that approximately 41% of voters have become more attentive to Bitcoin as a result of the country’s ongoing inflation issues. This heightened interest in cryptocurrencies underscores the growing skepticism towards conventional economic strategies and the quest for viable investment alternatives amidst a high-inflation climate.

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2024-06-13 11:11