WEEKLY CRYPTO ROUNDUP – MARKET REACTS TO FOMC 

The crypto market has experienced volatility in response to the June 14 Federal Open Market Committee (FOMC) announcement by Federal Reserve Chairman Jerome Powell. He revealed that the central bank would pause rate hikes for June, in line with investor expectations.

At the time of the FOMC announcement, Bitcoin’s price started the day trading above US$26,000 (AU$ 38,240). However, it has since retracted to a 24-hour low of US$24,800 (AU$36,500). The muted crypto price action could potentially be a lingering effect of the recent charges filed by the Securities and Exchange Commission (SEC) against Binance and Coinbase.

Impact of the FOMC Decision on Crypto and Equity Markets

The FOMC decision led to sharp drops in both crypto and equity markets. The stock market experienced a significant dip, with the Dow Jones dropping 200 points minutes after the announcement. Another major equity index, the S&P 500 Index, hit a 13-month high.

In the policy issuance, the Federal Reserve stated that in determining future policy changes, it will consider factors such as the cumulative tightening of monetary policy, the lag with which monetary policy affects economic activity and inflation, and economic and financial developments. The statement hinted at a potential return to interest rate hikes in the future. As of now, crypto prices are still highly correlated with the Dow and S&P 500.

US Economy and Crypto Regulation: A Glimpse into the Future

Despite the expectation of a sharp recession by major banks in 2023, investor sentiment about the current state of the economy remains low, according to a U.S. Bank analysis. The report suggests that while the U.S. economy is slowing, it is not reaching a recession.

Regulation remains a crucial issue in the cryptocurrency news cycle. While the European Union unveiled a digital asset framework called the Markets in Crypto-Assets law, the U.S. seems intent on regulating through SEC enforcement. The recent SEC lawsuits increased the number of cryptocurrencies classified as securities to 61, which represents $100 billion in value.

SEC Lawsuits

The SEC’s actions add to a long history of disputes, misconceptions, and mistrust over the actual use case of digital assets. Not all lawmakers are comfortable with Gensler’s actions, with Ohio Rep. Warren Davidson introducing the “SEC Stabilisation Act” into the House of Representatives on June 12. The bill proposes removing Gensler as chair and redistributing power among a committee.

Bitcoin Exchange Inflows, Outflows and Total Value Locked

The SEC’s scrutiny of centralised exchanges has resulted in increased Bitcoin exchange inflows and outflows. The inflows indicate increased sell-side pressure, while outflows typically represent a move to self-custody assets. Despite this trend, the decentralised finance (DeFi) sector hasn’t experienced growth. The total value locked (TVL), a common metric to examine the health and sentiment of the crypto market, has dropped 0.5% in the past 24 hours.

To read more about ETH and BTC’s on-chain activity, read our detailed article from Tuesday here.

What’s to come?

As we look back on this week’s turbulent events, the crypto market’s reaction to the FOMC announcement serves as a vivid reminder of the market’s interconnectedness with broader economic and regulatory shifts. While the climate remains somewhat uncertain, it is vital to remember that such periods of volatility can also herald potential opportunities for those who navigate the waves wisely. From the regulatory struggles to the evolving landscape of DeFi, this complex tapestry reveals that the future of crypto, while shrouded in some uncertainty, is also ripe with potential. As we continue to traverse this exciting terrain, it’s clear that the journey of crypto is anything but dull – and that’s something to look forward to in the weeks and months to come.