Bitcoin temporarily fell below $20,200 earlier today, before the US Federal Reserve is expected to do something it hasn’t done in 28 years. One percentage point.
In response to rising inflation and volatile financial markets, the central bank will raise the rate banks pay to borrow overnight by 1.5%-1.75%.
BTC and ETH fell to trade above $20,000 and $1,000 respectively as the sell-off continued in the broader crypto markets. This means that the total value locked (TVL) across all blockchains has dropped by more than 8% in the last 24 hours.
Michael MorchThe managing director at crypto/digital asset hedge fund ARK36 is closely monitoring price movements, “BitThe coin has actually been caught in the crossfire these past few days. There is still a large gap between nominal rates and real rates, so there is plenty of room for the Fed and other central banks to hike in the coming months. Investors cannot realistically expect more sustained growth in exposure assets until they become Fed pegs.
In addition, some parts of the wider crypto ecosystem are experiencing heavy computation. As the reality of the bear market began to set in, the hidden merits and structural weaknesses of projects that only worked as prices rose finally came to light. In the long run, tokens with strong use cases and utility will survive – just as they did in previous bear markets. But some of the companies in the space had unsustainable business models and now they are causing contagion.
So Bitcoin has been hit with a double whammy and it is very likely that we will see prices below $20K soon. Some are calling for 12 thousand dollars – and even if this is possible, we think that this price tag has a relatively low probability at the moment. Today, everything is in the hands of the feds. A 75 basis point rate hike could take us to $16-18k. On the other hand, a 50 basis point rate hike could result in a significant rally – possibly towards the $24K resistance levels.