Crypto markets started the week with bulls in control but turned lower on Wednesday after minutes of the Federal Reserve’s March meeting indicated that officials plan to move more aggressively to tackle inflation.
By Friday, leading tokens had shaken off the news and resumed a steady uptick. Ether was up 2.4% in mid-morning trading U.K. time, and Bitcoin had eked out a 0.7% gain, according to data from CoinGecko. ETH is up 0.5% over the last seven days.
Other leading DeFi projects — Solana, Polkadot, Uniswap, Polygon — also enjoyed modest gains in their native tokens. Terra was the fly in the ointment: LUNA was down about 5% Friday morning.
Fed officials are prepared to raise benchmark rates by 50 basis points, or 0.5%, at their next meeting in May, coupled with an accelerated pace of quantitative tightening, which is the process of shrinking the central bank’s balance sheet.
The minutes further showed wide support for a 0.5% hike during the Fed’s March meeting. We can only surmise that Russia’s invasion of Ukraine and the resulting market volatility stayed the Fed’s hand.
U.S. jobless claims hit their lowest level since 1968 on Thursday, implying that the US economy is running at close to full capacity. With inflation continuing to run high, it’s unlikely that the Fed will pause interest rate hikes again, given its twin job of maximizing employment and curbing inflation.
The End of Easy Money
Rising interest rates are generally considered headwinds for risk assets like stocks since the increased cost of capital results in companies spending more on servicing their debt and less on growth opportunities. Lower expectations of growth and cash flows tend to spook investors, who may perceive stocks as too risky given rising saving rates.
Crypto investor Adam Cochran posted a thread on the market’s reaction to the Fed minutes.
- Frax Finance’s FXS token led the pack this week with a 52% gain to $35 on the back of its partnership with Terra.
- Near Protocol rose 37% to $18.7 after announcing a $350M funding round earlier in the week and rumors of an upcoming USN stablecoin.
- Waves was the week’s worst performer, down 45% to $30 after being accused of being a Ponzi scheme.
Meanwhile, the party goes on in NFT land, with most blue-chip collections rising or remaining steady. The Bored Ape floor stands at 110 ETH ($325,000). Azuki and CloneX rose 25% this week.
The first omnichain NFTs were launched this week. Gh0stly Gh0sts is an avatar collection that was minted for free on seven chains. Holders are able to move their NFTs between blockchains using LayerZero.
frank, a collection of 2,000 animated anteaters, has taken Crypto Twitter by storm and has notched up over 2,000 ETH ($6.5M) in trading volume in the past two days.
Disclosure: The author holds NEAR tokens and Gh0stly Gh0sts NFTs.