Ethereum cuts gains, Bitcoin slips below $ 40,000 as Fed prepares to reveal cut plans – Cointelegraph

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Ether (ETH) and Bitcoin (BTC) pulled out on Wednesday as investors awaited further guidance from the United States Federal Reserve (Fed).

ETH price fell 0.57% to $ 2,857, while BTC / USD prices rose 0.68%, changing hands to $ 39,739 around 10:30 am EST. Nonetheless, both pairs hit their current levels after a downward correction from their respective intraday highs of $ 2,391 and $ 40,925, respectively.

Ethereum and Bitcoin Trends in Recent History. Source: TradingView.com

Traders increased their exposure to the cryptocurrency market after Tesla’s Elon Musk, Ark Invest’s Cathie Wood and Twitter’s Jack Dorsey spoke out in favor of Bitcoin at “The B Word” this week last. Further favorable winds came amid speculation about Amazon’s plans to accept BTC as payment, a rumor the retail giant later denied.

Ether, whose 30-day correlation with Bitcoin is 88% positive, has evolved in tandem with Bitcoin. Their synchronized price trends continued during the New York trading session on Wednesday, as markets waited for the U.S. Federal Reserve to reveal its plans to cut.

Talking about talking about tapering

U.S. central bank officials will conclude their two-day policy meeting on Wednesday, with a statement scheduled for 2:00 p.m. EST. Investors will focus on President Jerome Powell’s signals on how and when the Fed will begin to unwind its asset purchase program and any potential change in their outlook on inflation.

In detail, the US consumer price index soared to 5.4% year-on-year. As a result, up to 54% of Americans believe the US economy is in bad shape, according to a poll conducted by the Associated Press-NORC Center for Public Affairs Research.

But the Fed spoiled the rise in consumer prices by calling them “transitory” in nature. As a result, Powell said in his testimony to Congress earlier this month that the central bank would continue its $ 120 billion-per-month bond buying program, raising concerns that this could cause further inflationary surges, by particularly in the housing sector.

Brian O’Reilly, head of market strategy for Mediolanum International Funds, noted that there are no signs of slowing inflation in the coming sessions, so the Fed may just start to lean on rising consumer prices, otherwise put a break on their obligation. – purchase program. He added:

“There won’t be a change, but they’re at the stage where they’re starting to talk about tapering.”

What happens next to Bitcoin and Ethereum?

The greatest vulnerability of the Ethereum and Bitcoin markets is that their valuations may not be sustained without increasing the Fed’s liquidity.

Related: Bitcoin Bull Describes 7 Steps To More Fiscal Stimulus And Higher BTC Prices

Meanwhile, the solid foundation is that there is substantial capital on the sidelines to enter the market, with a DataTrek Research report noting that Robinhood’s retail investors alone hold $ 400 billion to enter the market. markets during the next big dip. FRED’s Retail Money Fund also notes that retail investors hold more than $ 1,000 billion compared to $ 643 billion in 2015.

Readings from Retail Fund Money show investors hold over $ 1 trillion. Source: FRED

“We are living in an unprecedented period of fiscal and monetary stimulus,” noted Anthony Pompliano, a prominent crypto advocate and partner of Pomp Investments, in one of his recent notes to clients. He added that investors would do so much better investing money in financial instruments than holding cash or negative yielding assets. He said:

“If our government and our economic organizations continue to ban bear markets and ban market corrections through their intervention actions, then the market will only be able to rise more and more over time.”

Tim Frost, CEO of wealth management platform DeFi Yield App, weighed in on concerns over analysts’ renewed bullish outlook for Ether and Bitcoin.

He told Cointelegraph that markets could resume their downtrend after “a brief rally,” in which Bitcoin drops to $ 20,000, dragging Ethereum lower, adding that:

“A revival of altcoin is a long way off. The crypto fear and greed index is also still heavily skewed towards fear – indeed for the longest time it has ever been skewed in that direction. It’s not the start of a new bull running around as much as a bear caught off guard taking a nap. “

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move comes with risk, you should do your own research before making a decision.