‘Higher for longer’ interest rates unnerve investors
Hola folks!
Hope you are taking good care of yourself as daytime temperatures soar across India. Yet, the global crypto market appears to be cooling after a blockbuster first quarter. The fourth Bitcoin halving is behind us and the crypto market seems to have factored in the impact of halving as it has been trading sideways for the past few days.
While the market is witnessing token-specific action, the broader crypto market is in a consolidation phase, with Bitcoin holding its position above the $60k mark.
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The global crypto markets bled red last week, as the macroeconomic indicators worsened and the prospects of an interest rate cut by the US Fed reduced further, sending "risky" assets lower in prices, with the overall crypto market cap now at just above $2.4trn level.
U.S. inflation rose 2.7% in the 12 months through March, data on Friday showed, above the U.S. Federal Reserve target of 2%. The inflation data was higher than market expectations, suggesting the economy is running hot with inflation remaining sticky. This reinforces expectations the Federal Reserve is likely to keep interest rates higher for longer, which is bad for riskier assets, especially for crypto prices. Another metric to look for is the relative strength of the USD, which touched its highest level against the Japanese Yen in 34 years and is generally considered a sign of weakness in crypto prices.
Market leader Bitcoin reacted sharply to this development and is down in the red for the week, trading around the $62k level. In the US, the week marked an end to the solid inflow run witnessed by the newly launched spot BTC ETFs, as even Blackrock's IBIT and Fidelity FBTC saw outflows as investors re-adjusted their risk profiles for a world with higher interest rates.
Surprisingly, Ethereum's price fall wasn't as steep as the big development from Hong Kong would see spot ETFs for ETH trading for the first time, as early as next week. ETH continues to trade below the $3.2k price level, but there was an overall gain in its market share compared to other L1s as well, as DeFi TVL rotated back to Ethereum.
The weakness was observed in the broader crypto markets, which were a sea of red as most Layer 1s corrected sharply during the week compared to Ethereum's price fall. Leading the decline were ETH competitors that had run up significantly in the recent past, including Solana's SOL and Avalanche's AVAX.
A steep price correction was also witnessed in AI theme-related tokens like Render's RNDR, and FetchAI's FET, as they saw heavy profit booking. Recently launched Ethena's ENA token fell sharply because funding rates for Perps turned negative, which was a cornerstone for Ethena to generate higher yields.
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Another category of tokens under selling pressure was meme coins like DOGE, SHIB, and WIF. However, there were exceptions like BONK that surged after getting listed by Europe's large neo-bank Revolut and PEPE which saw whale accumulation resulting in a price increase.
Other outliers with positive price action included Hedera's HBAR which shot up by 100% on the news of an exclusive Blackrock integration for RWA tokenization, which was later corrected and resulted in the paring of the gains. Akash Network's AKT token jumped by 50% in price as it began trading on the Korean exchange Upbit. Korea is increasingly becoming a market mover with KRW-denominated trades dominating USD volumes in Q1 2024.
(All data here is as of 3:18 p.m., 29 April 2024)
Before we conclude, here’s a quick look at some important news from around the crypto world.
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That’s it for now. Thanks for sticking around.
See you later, folks!