Crypto Rally Gains Steam After Fed Sticks To Plan

Risk assets took flight after Fed chair Jerome Powell announced what had already been broadly predicted — a 25 basis point hike of interest rates on Feb. 1.

Ether briefly traded above $1,700 for the first time since September 2022, while Bitcoin hit a five-month high above $24,000.

ETH and BNB, the top two assets native to smart contract platforms, are both up 4.5% in the last 24 hours, according to The Defiant Terminal.

It’s not just crypto — QQQ, which tracks the Nasdaq 100 and is the fifth-largest ETF with over $156M in assets under management, has gained 5.7% over the past two days. Meanwhile, the S&P 500 jumped 2.5%.

That the gains are not limited to crypto assets indicates that the increases in price are not directly related to digital assets. This recurring correlation has held since the Federal Reserve started raising rates in March 2022.

“With inflation comps getting easier in the coming months, we believe the macro and FED will likely be less of a factor for crypto markets for some time,” tweeted Kelvin Koh, co-founder and CIO at Spartan Capital.

OP Hits ATH

Regardless, there have been outperformers in the crypto space — OP, the token of Optimism, a Layer 2 scaling solution for Ethereum, has continued a blistering January and briefly traded above $3 for the first time on Feb. 2.

The Layer 2 saw activity plummet last week after an incentive program ended, but a new proposal from the Optimism Foundation has seemingly found favour with investors.

The Bedrock upgrade is touted as offering “a new level of modularity, simplicity, and Ethereum equivalence for Layer 2 solutions.”

OP is up nearly 200% in 2023.

Other top gainers among the top 100 digital assets are LRC, the token of Loopring, another Layer 2, FTM, the native token of the Fantom blockchain, and RNDR, the token of a GPU cloud rendering project.

ETHPow Rallies

Curiously, ETHPoW, the network which continued running Ethereum under proof-of-work after the Merge, a massive upgrade which completed Ethereum’s move to proof-of-stake, has also jumped over 36% — it now has a market capitalization of over half a billion dollars.

It was broadly assumed that ETHPoW would be dumped as a useless fork token, but the past day’s price action may compel investors to take a second look.

Another Hike In March

Going forward, the CME’s Fedwatch tool indicates an 82.7% chance of the Fed raising rates by another 25 basis points at its next meeting on Mar. 22. The probabilities are calculated using the CME’s Fed Fund futures contracts.

Target Rate Probabilities For March Meeting

In a press release, the US central bank said it is “strongly committed to returning inflation to its 2 percent objective.”
Inflation has shown signs of cooling in January, but consumer prices are still up 6.5% over the past 12 months, according to the US Bureau of Labor Statistics — the Fed acknowledged this, saying inflation has eased somewhat but remains elevated.