Bitcoin and other cryptocurrencies have risen in price despite negative news about the US recession. Why?
The US Federal Open Market Committee (FOMC) announced a 0.75 per cent hike in the benchmark lending rate on 27 July 2022 at 21:00. The event had previously been discussed at length among investors and it was the rate hike that was expected by their overwhelming majority. Although the rate hike itself is perceived as a negative for markets in general and crypto in particular, immediately after the announcement, Bitcoin’s price began to rise steadily. What caused the jump on the chart? We tell you about the situation in more detail.
To demo the situation in the cryptocurrency market, here is a general chart of the largest coins by capitalization. As you can see, Bitcoin rose by 4.13 percent overnight, while Etherium gained 5.75 percent. SOL and AVAX performed slightly better at 7.93 per cent and 6.54 per cent respectively.
Cryptocurrency price movements over the past 24 hours
The picture on a monthly scale was much more pleasing. The leader here was Etherium with a 50 percent increase.
Cryptocurrency price movements over the past month
Why is cryptocurrency rising?
By the end of the day on July 27, the value of Bitcoin had jumped to $22,500. Today, the first cryptocurrency is trading in the $24,000 zone, a level BTC took last night.
The moment the bet was announced on the Bitcoin chart
Most of the major altcoins, including Etherium, have shown a similarly rapid rise. The coin is trading above $1,700 this morning.
Etherium exchange rate chart
Quantum Ecomomics CEO Maty Greenspan shared his view on the market’s growth in an interview with Cointelegraph reporters. Here’s his rejoinder, in which the expert shares his thoughts on what’s happening.
Markets love to rise on the days of Fed announcements, even if those announcements are pretty tough. Fed chief Powell is particularly adept at delivering bad news. Obviously, investors were expecting the worst.
Note that Fed chief Jerome Powell is really good at presenting unpleasant data. For example, let's recall June 15 when the Fed raised its benchmark interest rate by 75 basis points for the first time since 1994. And while the event was quite radical - something like that hadn't happened in decades - Powell advised against counting on such hikes becoming "business as usual. The market then also rose in response.
Although it is worth pointing out that the rate was raised by the same 75 basis points in July.
US Federal Reserve Chairman Jerome Powell
The worst that could happen is a more aggressive rate hike of 1 percent, i.e. 100 basis points. The probability of such FOMC decision was low, but still not excluded by some experts. That is, if the news from Jerome Powell had been worse than expected by most, Bitcoin could have gone down quickly, the expert believes. But that didn’t happen, so investors have taken to buying up cryptocurrencies.
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The negative, albeit expected, news from the FOMC is not the only major event after which BTC rose along with the rest of the cryptocurrency. Yesterday, a 0.9 percent decline in US GDP for the second quarter of 2022 was officially announced. As the decline continues for two quarters in a row, it clearly indicates that the economy is in recession, although people in government circles prefer not to call the current situation that.
The announcement of the GDP figures was accompanied by comments from Powell and White House officials. They made it clear that “there is no recession”, avoiding harsh terms in their quotes. As a result the coins showed an increase again.
The impact of the economic performance of various US industries on the country’s GDP
So things are bad in the economy, but Bitcoin continues to rise. Does this mean that a long-term uptrend will now prevail in the crypto market? Many people doubt it. Here’s how trader Gareth Soloway commented on the situation.
GDP is down 0.9 per cent. Markets fall first and then rise quickly on the back of the collapse of the dollar index and the likelihood that the Fed will no longer be able to aggressively raise the base rate. Risky assets will rise until markets realise that the Fed cannot get us out of a deep recession with a printing press.
In other words, the expert anticipates a new wave of Bitcoin decline. The same opinion is held by a crypto trader nicknamed il Capo of Crypto.
Can’t you see that Bitcoin’s price is just fluctuating between $19,000 and $23,000 in a downtrend with no signs of accumulation? If you want to buy now, buy. But then don’t complain if the market falls back to a new low, which is very likely now.
It is worth noting that this trader has been wrong on numerous occasions. In particular, at the $40,000 level, he called this price line a long-awaited bottom for Bitcoin. Since then, the cryptocurrency has fallen by more than half. Which means that such unequivocal comments should only be taken as a possible scenario, which may well not happen.
Cryptocurrency trader
We think the unravelling of the rise is much simpler than many analysts think. Prior to this, Bitcoin along with other coins were extremely oversold, meaning their exchange rate fell too low amid forced liquidations of positions by large cryptocurrency funds like Three Arrows Capital. Now, however, there is a logical market rebound, with the inflation of conventional money as one of the arguments. In such an environment, some investors would probably prefer to engage with decentralised, independent digital assets rather than the government money that led to the current situation.
What do you think about this? Share your opinion in our Millionaire Crypto Chat. We’ll talk about other topics there as well.
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