The week is off with the bulk of the cryptocurrency trading in the red, which is largely attributed to the upcoming rate hike announcement from the US Federal Reserve Bank.
According to a report by Yahoo Finance, Fed officials are expected to deliver a third-straight 75-basis-point increase to their benchmark policy rate during the two-day meeting which ends Wednesday.
Investors across both the crypto market and traditional equities markets are bracing for the impact of the announcement. This is especially as higher-than-expected inflation figures in August (an 8.3% YOY increase in consumer price index -C PI) sparked more pessimism about the Fed rate hike.
Data from CryptoRank, a cryptocurrency price data aggregator, shows that all of the top 10 cryptocurrencies by market cap have dropped between six to 11% in price in the last 24 hours. Market leader Bitcoin (BTC) fell around 8% to be trading at around $18,400.
Similarly, the second largest crypto Ethereum (ETH) fell 11% on the day to currently be trading at around $1,290. The current ETH price is also a 26.1% drawdown from the one-month high price of about $1,800 it reached in the week preceding the Merge.
Meanwhile, BNB, XRP, ADA, SOL, and DOGE have fallen about 7%, 11%, 10%, 8%, and 8.5% respectively on the day per data at the time of writing.
Analysts still hopeful for Bitcoin
Despite the turbulent market action, analysts have not given up the notion that Bitcoin is forming a bottom. DrProfitCrypto, a pseudonymous crypto market analyst, told his over 35,000 Twitter followers that the pioneer cryptocurrency has entered a “bottom phase” in which he is expecting the price to remain stable between $18,000 and $25,000 till March 2023.
A 100bps rate hike announcement only has a 20% probability of occurring according to data from the CME Group’s FedWatch Tool. Regardless, data collated by TIME still shows that the crypto market has a history of also nosediving in the aftermath of the Fed rate hike announcements.
The Fed rate hikes in March, May, and June all saw at least a 10% drop in the price of BTC. The drop following the Fed’s July meeting was less severe, the TIME report noted.
However, the analyst adds the caveat that this price bottom would only hold if the Fed announces the already priced-in 75bps rate hike. An announcement of a 100bps hike will see the market shed more blood.