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Beaten-down cryptocurrencies rallied Thursday amid palpable relief in global markets after Federal Reserve Chair Jerome Powell indicated that a series of super-sized interest-rate hikes is unlikely.
Everything from Bitcoin to smaller and sometimes lesser-known tokens — so-called altcoins — pushed higher, snapping a prolonged period of pain that contributed to a more than $1 trillion drop in crypto market value this year.
Bitcoin gained for the first time in 10 days, rising as much as 6.1% to $22,950. Ether at one point added 6.6% to $1,256. Cardano, Solana and Dogecoin posted gains of between 4.5% and 11% as of 9:10 a.m. in Singapore.
Just how long the rebound will last is anyone’s guess after tough-to-stomach losses in the crypto space over the past month. Many have welcomed the wring-out of excesses and sky-high speculation.
“The reality is we need to see capitulation where that ‘noobishness’ gets washed out,” said Max Gokhman, chief investment officer for AlphaTrAI, adding that “we need to see the asset class evolve to a more mature state, and I think it’s in the process of doing that.”
Crypto started sliding late last year on expectations of a less accommodative Fed, with rising interest rates hurting the industry and its prospects.
Last month’s collapse of the Terra blockchain and the recent decision by crypto lender Celsius Network Ltd. to halt withdrawals have also taken a toll, while a tweet this week from the co-founder of crypto hedge fund Three Arrows Capital fueled speculation that it had suffered large losses.
Even long-term holders who have avoided selling until now are coming under pressure, according to researcher Glassnode.
“Crypto is a risk asset. It’s an expression of people taking where they are on the risk spectrum, whether they’re playing more risk-averse or if they’re playing more risk-seeking,” Anna Han of Wells Fargo Securities LLC said in an interview.
The Fed raised rates by 75 basis points Wednesday, stepping up the fight against inflation. Powell signaled another big hike in July but added “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.” That leans against the risk of a string of jumbo moves.
All sorts of pockets in crypto have been beset by negative developments. A number of crypto firms have announced layoffs and hiring freezes, and many market-watchers are expecting further price declines ahead.
Michael Purves, founder and CEO of Tallbacken Capital, sees that risk for Bitcoin. “We continue to think that Bitcoin’s broader picture is bearish, and perhaps our $15k target is not bearish enough,” he wrote in a note. “Nonetheless, for the near term, we recommend taking profits on short positions.”
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