Macro-economic factors persistently mold the future course of the crypto industry with a significant impact on inflation and interest rates. The Federal Open Market Committee (FOMC) has maintained a predictable stance on these factors, seemingly providing a stable backdrop for cryptocurrencies such as Bitcoin on a roll with an 87% rise and Ether increasing 64% this year.
Contrarily, a technical analytics tool known as Anchored Volume Weighted Average Price (AVWAP) indicates that despite the turbulence caused by legal challenges against exchanges like Binance and Coinbase, Bitcoin has managed to rally back, trading 9.1% higher than its AVWAP since those events.
This prompts the paramount query – what are the potential macroeconomic developments that could potentially erode these impressive gains? Reading between the lines of the Federal Reserve Chairman Jerome Powell’s recent speeches, it appears that the FOMC is committed to its present course of action. Anticipations of at least two rate hikes in 2023 have been factored in by the markets, making drastic price shocks unlikely.
However, there are certain macro factors which have the potential to impact crypto markets. One is the widely publicized collapse of Silvergate Bank and Silicon Valley Bank, which sent shockwaves through the crypto sector. Stress tests have calmed some concerns, with systemically critical banks reportedly well poised to sustain even harsh recessions, suggesting that aggressive rate hikes might not be detrimental to the banking system.
Creditbalances, which have hit all-time highs, are an understated factor of concern for the crypto investment realm, which still significantly relies on retail investors. Coinciding with higher interest rates and a potential decrease in employment, this could bring turbulence to cryptocurrencyinvesting.
On another note, the largest spread between 2- and 10-year U.S. Treasury yield since 1981 signals a potential recession. The FOMC does not project one currently, but the disparity between economic history and forecasting introduces a degree of uncertainty not yet possibly reflected in the markets.
So here arises an incipient doubt, nudging investors into further introspection, triggering a reluctance to invest in crypto assets which could potentially pose a short-term hindrance for cryptocurrency prices.
On a different note, crypto data firm Block Scholes claims that crypto prices are no longer tied to stocks, signaling a mixed bag for investors, valuable uncorrelated asset for the macro investor, and bad news for lone crypto traders. Furthermore, the depreciation of Bored Ape Yacht Club NFTs to a 20-month low is another reality check following the trend in crypto where the juggernauts Bitcoin and Ether are holding up, while the rest of the industry is barely meeting ends.
Source: Coindesk
