Cryptocurrencies take it easy, as they await Powell´s speech
Cryptocurrencies are taking it easy on Tuesday, a day of widespread market declines. Bitcoin (BTC), the world's largest cryptocurrency, is taking a breather after several days on the rise and is trading practically flat at $17,200; Ethereum (ETH), on the other hand, is above $1,300 and has increased around 1%.
"A weaker dollar and an improving risk environment are providing some relief for cryptocurrencies, with Bitcoin breaking above $17,000 and hitting its highest level in more than three weeks. It will take a lot more than that for cryptocurrencies to significantly break out of their lows, but it's certainly a good start," stated Craig Erlam, market analyst at Oanda, on the recent rally in the cryptocurrency market, which has gained $50 billion in market capitalization so far in 2023. That change, experts point out, won't happen today.
And it won't because the day's agenda at the macroeconomic level arrives marked, above all, by the Federal Reserve (Fed). In recent hours, Mary Daly and Raphael Bostic, presidents of the San Francisco and Atlanta Fed, respectively, recalled that the US central bank is considering raising official interest rates above 5% and keeping them at those levels for some time. Likewise, both didn´t rule out a 50 basis point hike at the February meeting, although the market expects a 25 basis point hike at the meeting.
However, the main event on Tuesday will be the appearance of Jerome Powell, chairman of the US central bank, in Stockholm. Invited to the farewell of the last governor of the Bank of Sweden, Powell is expected to move the markets with his remarks and Wall Street is already leaning towards the red as investors anticipate that "he won't pop the champagne cork just because wages grew less than expected last month," commented Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Meanwhile, Naeem Aslam, chief market analyst at AvaTrade, believes there are two things to pay attention to in Powell's speech: the Fed's view on the health of the U.S. economy following the latest jobs data and its thoughts on where monetary policy is headed, "given that the Fed is still far from reaching its target."
"Some FOMC members believe that inflation is more than likely to hit the three handle barrier by the end of this year, which would be a remarkable achievement for the Fed if it becomes a reality. But does that mean the Fed will continue to raise rates as aggressively as it is currently doing?" questioned Aslam. If the answer is yes, the expert points out that the central bank is likely to make "another policy mistake," as "aggressive rate hikes mean a hard landing for the U.S. economy and one can only dream of a soft landing."
In other news, former FTX engineering director Nishad Singh met with U.S. prosecutors as part of the investigation into the collapse of the exchange. The news surrounding the case continues to come and go, as well as the spin-offs from it, and it doesn't look like it's going to go away any time soon.
"Overall, it's hard to say that the worst is over as far as cryptocurrencies are concerned, that all the bad actors have been kicked out and that regulation is where it should be. However, it is safe to say that we have fewer bad cryptocurrency players and that we are a few steps closer to having clear guidance from regulators," noted Aslam.
For the AvaTrade analyst, "the tide could turn soon." "It's time to watch the price action and fundamentals more closely when it comes to price action. BTC's price movement above $20,000 could rekindle some confidence among traders," he sentenced. When it might come, he assured, is another story entirely.
In other market news, the losses of 3% and 2% for Cardano (ADA) and Solana (SOL), respectively, stand out after their strong performance so far in 2023. On the positive side, dog-themed meme tokens Dogecoin (DOGE) and Shiba Inu (SHIB) rebounded above 1%.