Cryptocurrencies exchanged the rate

Quotes of leading cryptocurrencies fell to their lowest values ​​since June. The bitcoin rate on September 19 fell to $18.23 thousand, and the ether fell to $1.28 thousand, losing 16–28% over the week. Investors are reducing investments in virtual currencies on expectations of an aggressive rate hike by the Fed, as well as the introduction of a new mining algorithm for Ethereum. If the plans of the American regulator continue to aggressively tighten monetary policy, bitcoin quotes may drop to $12,000, analysts say.

According to coinmarketcap.com, the price of bitcoin (BTC) fell to $18.23 thousand on September 19, the lowest level since June 19. This is 6% lower than the previous day’s close. By 18:30, the rate regained some of the lost positions and reached $19.15 thousand, but remains 16% below the local maximum adopted in the first ten days of the month. The two-month low was also updated by ether (ETH) quotes, which fell during trading to the level of $1.28 thousand, which is 28% lower than the values ​​of a week ago. However, other cryptocurrencies declined less significantly. Over the week, Binance Coin, Cardano, Solana lost 10-14% in price and rolled back to the levels of two weeks ago. The capitalization of the entire cryptocurrency market decreased over the week by more than $100 billion, to $928 billion.

The main reason for the fall in digital currencies was the risk of an aggressive increase in the base rate by the Fed amid high inflation in the country.

In August, consumer prices in the country, although they slowed down to 8.3% (from 8.5% in July), however, exceeded analysts’ expectations (8.1%). This was mainly due to a slowdown in the growth of energy prices against the background of the sale of oil from the country’s strategic reserves.

“The published data on inflation in the US caused a commotion, swinging the pendulum of expectations of the Fed’s key rate hike at the meeting on September 21 from 50-75 to 75-100 basis points. In addition, investors have raised their expected rate cap for the entire cycle,” said Chen Limin, CFO and Head of Trading at ICB Fund. According to Investing.com, the rate forecast for the end of the year is 4-4.25% with a probability of 36% and 4.25-4.5% with a probability of almost 48%. Currently, the rate is 2.25–2.5%.

After the arrival of institutional investors in the cryptocurrency market, the correlation of the crypto world with the traditional financial system has increased, market participants note. SberCIB equity strategist Dmitry Makarov estimates that on Monday, the 180-day correlation between the price of bitcoin and the S&P500 broad market index was 78.5%, and the correlation with the NASDAQ 100 technology sector index was 83.5%. At the same time, since the beginning of last week, US indices have fallen by 4-7%.

In addition, the leading fall in the quotes of the leading currencies is associated with the completion of the transition of the Ethereum blockchain from the Proof of Work (PoW) algorithm to the more economical and technologically advanced Proof of Stake (PoS) algorithm.

In anticipation of this, as Grigory Klimov, founder of the STASIS stablecoin platform, notes, many investors opened positions hoping to receive a free dividend in the form of Ethereum-PoW, which moved away from the main network. However, now, having been disappointed without positive dynamics, they fix profits or losses, he believes.

In the coming days, the behavior of investors in the digital currency market will depend entirely on the outcome of the meeting of the American financial regulator. Short-term optimism may cause the Fed to raise the rate by no more than 75 basis points, but provided there is no hint of further strong increases. “It cannot be ruled out that the head of the regulator, Jerome Powell, may allow a 0.5% increase in November and December, for which the markets may also not be fully prepared,” says Chen Limin.

Grigory Klimov believes that the Fed’s comments on the pace of selling assets from its balance sheet, which in September were out of schedule, will be important for the market, Grigory Klimov believes. Hints of increased sales towards the end of the month may increase pressure on risky assets. According to Chen Limin, the drop in BTC quotes below $17.6 thousand will mark a continuation of the downtrend with the potential to reach $12 thousand. In this scenario, ETH, according to him, will return to the June low of $0.88 thousand.

Vitaly Gaidaev