The cryptocurrency market seems not to have bottomed out yet and ends the week with a strong red tide driven by a historic decision by the Federal Reserve, which we have been expecting for a few weeks.
Cryptocurrencies had one of the worst weeks so far this year, which has generated a lot of uncertainty among investors, since assets such as Bitcoin and Ethereum suffered losses of around 10%, approaching the cryptocurrency with the largest market capitalization in the world to trade close to $30,000, a price that has not been reached since July 2021.
Last Wednesday, as we had highlighted in previous blogs, the Federal Reserve’s meeting was held, in which a critical event for the short-term future of the cryptocurrency market was presented, the rise in interest rates, which also presented a historic decision. Jerome Powell, fulfilled what he had mentioned days before, and officially announced an increase of 0.5 percentage points, this being the second rate hike in 2022. This shows us the aggressive measures that the US institution will take in order to solve the strong current economic problem, high levels of inflation.
The last time the Federal Reserve chose to raise interest rates half a point was in 2000, when Google was not yet a public company, the first iPhone had not been launched and the twin towers were still standing. However, the markets were facing the famous technology bubble, so this creates uncertainty about what will come in the short term, the impact and the consequences that having made this decision could bring.
It is worth mentioning that the Fed anticipates that it will be necessary to raise rates again by half a point in each of its next two meetings, which would take them between 1.75%-2% at the end of July.
Now we go with a little more optimistic news, since the National Assembly of Panama announced last Thursday the approval of the Crypto Law, which aims to regulate the commercialization and use of crypto assets, the issuance of digital value, the tokenization of metals precious and other assets, as well as payment systems and other provisions.
The Panamanian congressman, Gabriel Silva, confirmed through his Twitter account that the legislators approved the “Panama Cryptocurrency Law” after a third debate. According to Silva, the law “will help Panama become a center of innovation and technology in Latin America.” On the other hand, he mentioned that the bill does not intend for any cryptocurrency to become legal tender, but it will allow the use of cryptocurrencies as a payment method for any transaction.
In other news, another landmark event for cryptocurrency adoption took place within the system, as America’s largest cryptocurrency exchange CoinBase received the first cryptocurrency-backed loan from Wall Street (Bitcoin, specifically), by Goldman Sachs, one of the most important traditional financial institutions in the North American country. This has generated a lot of optimism regarding the adoption and integration of cryptocurrencies in the operations of large institutions, since it is a clear sign that it seeks to establish the base and strengthen the ties between the world of cryptocurrencies and traditional finance.
The exact amount of the loan has not yet been revealed, but it is known that it has 24-hour risk management, and also requires Coinbase to top up its BTC collateral if a sharp price drop occurs.
Returning to the bad news, the central bank of Argentina has decided to ban unregulated crypto transactions at traditional banks. Even though Argentina is considered to be a crypto enthusiastic country, uncertainty started to build as the International Monetary Fund (IMF) is said to be putting pressure on policymakers. This announcement has been made a few days after the largest private bank in Argentina, Banco Galicia, decided to add cryptocurrency trading.
Bitcoin is above $33,000, after a rather negative start to the week, in an area that seems to generate a slight support, which if breached, could take the value of the cryptocurrency to possibly $28,000. Could it be that it has already hit rock bottom?
BTC/USDT 1D (TradingView Chart).
For its part, Ethereum is close to $2,400, behaving similarly to Bitcoin, with a fairly positive correlation. However, a support zone seems to be closer in the case of Ethereum, around $2,300.
ETH/USDT 1D (TradingView Chart).
Although we already expected a rate hike and a possible crash within the cryptocurrency and stock markets, we have seen pretty tough results in the last few days, as Bitcoin lost more than 50% of its value after it reached its latest all-time high. However, all those who are looking for the long term should be calm, since we can see more and more innovations and implementations of crypto assets in the world. Making recurrent purchases allows you to reduce the impact of short-term volatility, especially in the current market situation. Without further ado, we wish you an amazing week.
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