December 8, 2022

Cryptocurrencies came under pressure on Wednesday after the Federal Reserve raised another massive interest rate hike and warned From the economic pain of violent policy tightening still to come.

Bitcoin, the largest token, is down as much as 4% and is perilously close to dropping below $18,000, touching distance from levels last seen in 2020. The second largest coin, Ether, continues to underperform, It fell by 7.2%.

The Fed’s determination to raise interest rates to inflation-hit levels at the expense of lower asset prices sent chills through global markets. Shorter maturities Treasury yields jumped while long-term interest rates fell, deepening the bond curve inversion seen as a harbinger of a recession.

This background provides a bit of relief for the cryptocurrency markets. They were already reeling from a $2 trillion drop from a record high of 2021, a breakup filled with explosions like hedge fund Three Arrows Capital and Terraform Labs — whose co-founder, Do Kwon, is wanted by the authorities.

“If the Fed continues to tighten, unless it implements yield curve control to keep the curve positively tilted, the crypto system will see a lot of failures,” said Brian Pellegrini, founder of Intertemporal Economics. “Eventually a few rich heroes will appear, but in the meantime there will be blood in the streets.”

The MVIS CryptoCompare Digital Assets 100 Index fell this week, taking its losses for 2022 to about 62% compared to 22% for global stocks. The correlation between stocks and bitcoin is high and close to the record, a sign of how the assets fluctuate through common macro factors.

JPMorgan Chase & Co CEO Jamie Dimon hasn’t helped the mood in the digital asset markets by reasserting Doubt The tokens are called “Decentralized Ponzi Schemes”.

Bitcoin price was around $18,670 as of 9:50 PM in Los Angeles. Ether was priced at around $1,260 and continues to take an extra hit with a previous spike in hype around the upgrade of its Ethereum network. Coins like Solana and Avalanche were also red.

Some traders may look to metrics like Bitcoin’s 14-day RSI to confirm that a bounce is possible. The RSI, a measure of momentum, is close to oversold levels. But mixed bets looked few and far between for riskier assets in the wake of the Fed’s troubled performance.

Bloomberg writer Carly Wanna contributed to this report.

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