‘All Bets Are Off’—Crypto Now Braced For $8.9 Trillion Earthquake

Crypto earthquake all bets

‘All Bets Are Off’—Crypto Now Braced For A $8.9 Trillion Earthquake As The Prices Keep Swinging

Since the co-founder of Ethereum published his unexpected “surge” predictions and traders tried to read the Federal Reserve’s attitude, the price of bitcoin and other cryptocurrencies has fluctuated drastically this month.

After plummeting during the first half of the year as the Fed started to hike interest rates, the price of bitcoin has maybe found a floor in July, rising around 10% from the month’s beginning. Meanwhile, as anticipation for its upcoming upgrade grows, Ethereum has surged about 50%, boosting the prices of other top 10 cryptocurrencies such as xrp, Solana, Cardano, and Dogecoin.

The market is preparing for the Fed to go “bigger and longer” in its war against red hot inflation as it quickens the reduction of its $8.9 trillion balance sheet after leaks showed a “huge red signal” for bitcoin and cryptocurrency exchange Coinbase.

Following the rate increase in June, the Federal Open Market Committee (FOMC) of the Federal Reserve will convene on Tuesday and Wednesday of this week and is anticipated to increase interest rates by an additional 75 basis points.

Following June’s shocking consumer price index (CPI) reading of 9.1%, traders had predicted earlier this month that the Fed would hike interest rates by a full percentage point.

“Financial markets had begun to price in a one-percentage-point interest rate increase at this meeting but Fed officials appear to have talked away that prospect,” Russ Mould, investment director at broker AJ Bell, wrote in emailed comments.

According to CME Fed watch data, markets are currently pricing in a 70% possibility of a 0.75% increase to 2.50% and a 30% chance of a complete one-point increase. The Fed funds rate is expected to reach at least 3.50% by the end of 2022, according to the market, as the U.S. central bank works to reduce inflation from its 40-year high of 9.1 percent.

“But all of this depends on and even assumes, that inflation peaks very soon,” Greg McBride, chief financial analyst at Bankrate, told MarketWatch. “If not, all bets are off.”

According to Mould, this month’s producer pricing index (PPI) figure of 11.3%, which is close to the record 11.6% seen in March, “suggests there could yet be more pain to come.”

The Federal Reserve is also planning to quicken the implementation of its so-called quantitative tightening programme, which has already lowered total assets by $66 billion from their peak of $9 trillion and will increase to $95 billion each month starting in September.

Total Fed assets of $8.9 trillion still mean that the central bank’s balance sheet is 8% bigger than it was a year ago, 114% bigger than it was before the pandemic in February 2020 and nearly nine-times (99X) bigger than it was before the Great Financial Crisis of 2007-2009,” Mould added.

According to Mould, this month’s producer pricing index (PPI) figure of 11.3%, which is close to the record 11.6% seen in March, “suggests there could yet be more pain to come.”

Some market observers and investors worry that U.S. inflation is “more deeply entrenched” and that the Fed would need to take “bigger and longer” measures to reduce it.

“My own view is the Fed funds rate could exceed 4%,” Joseph Zidle, chief investment strategist in Blackstone’s private wealth solutions group, told Bloomberg. “I think they could go above 4.5%, maybe even closer to 5%.”

But other experts are optimistic that the Fed’s softer tone this week would provide some much-needed comfort after a trying few months for the stock market, bitcoin, and cryptocurrency markets.

“If they come in with a 75-basis-point hike as we expect but soften the language about future hikes, it would be a huge boost to markets next week,” Luke Tilley, chief economist at Wilmington Trust, told Barrons.

online sources: forbes.com, barrons.com

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