Crypto Market Decline Awaiting FOMC Decision: Key Factors
Renewed selling pressure was observed on the cryptocurrency market on Wednesday, September 16, before the much anticipated FOMC decision by the Federal Reserve. Trading at $2.59 trillion, the total market capitalization dropped by about 1.65% The prices of Bitcoin, Ethereum, and XRP were at $75,000, $2,400 and $1.30 respectively.
FOMC Meeting Is the Most Important Thing for the Price of Crypto
The probability of a 25 basis point hike was contained in almost all of the market prices. This would take the target federal funds range from 3.50%-3.75% to 3.75%-4.00%.
The Fed’s higher interest rates will give a greater return to cash, so investors will have less interest in speculative assets like crypto. Thus, traders have been more risk averse before the announcement and the following speeches by Fed officials.
Setback of CLARITY Act Increases Regulatory Concern for the Sector
Regulatory uncertainty added more pressure. On September 15, the CLARITY Act failed to advance in a 49-50 vote in the U.S. Senate. 60 votes were required to break the filibuster. The Act attempted to create a framework for digital asset regulation.
The failed act created uncertainty for digital asset laws in the U.S. and caused XRP pricing and volumes to drop compared to other digital assets.
Selling Induced by ETF Outflows
The decrease in short-term interest was shown in the spot crypto ETFs. Spot Bitcoin ETFs reported net sells totaling $450 million on September 13, compared to net buys of $160 million on September 12. The Ethereum spot ETF reported net sells totaling $141 million on September 13 vs. net buys totaling $121 million on September 12 and a total of $216 million on September 9.
The main focus is on the ETF outflows. Pressure on underlying assets is a result of continuous sells and more cautious institutional positions.
Oil prices and inflation are changing markets. The direction of most currencies can now be followed along with movements of oil prices and inflation. Currently, oil prices are trending upwards, with prices being supported by the political tensions in the Middle East. Until the demand for inflation and changing prices slows, both of these events remain factors with risk markets.
Bitcoin was trading around $75,000, with traders assessing if this level would provide short term support. Ethereum was trading below $2,400 and would have to clear this level for price to make a recovery. XRP traded below $1.30 level and was trading down from the previous support level of $1.50.
As the decision of the FOMC and the Fed’s direction on policy moves become clear, the markets will be more reactive to the new outlook as a more restrictive policy will lead to volatility, while the reverse will be the case for a less restrictive policy.
