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Crypto Market: Can Crypto Survive the Game of Hikes?

Last week was a rough one for the crypto market with the inflation reading and Ethereum’s merge completed. However, the market remains choppy with the U.S. Fed now steering the wheel, fully back from its holiday season.

Bitcoin saw an abrupt drop below the $18,500 level on Sept. 19 before temporarily finding some support above $19,000 and retracing back to $18,900. This week was also bloody for the broader crypto market, with major coins down from 15% to 25%.

As the largest crypto’s saw renewed jitters in riskier assets, the total crypto market cap slipped below the $1 trillion mark again, and the Crypto Fear & Greed index plunged to the ‘Extreme fear’ zone.

The Craze of Fed’s Decision

Investors braced for the Fed’s decision on another interest rate hike, a move that could possibly bring another toll on the risk-on assets after a streak of trading days in steep losses seen in both crypto and stock markets since Sep 13, 2022.

While the Fed seems to be on track for a 75 bps hike, there is still a probability of a 100 bps interest rate increase. Fed Chair Powell’s speech was an important signal for the markets with guidance on whether the Fed will implement similar increases later this fall.

Undoubtedly holding large power over the crypto market, this macro event is hard to trade since it’s unclear if the market has already priced in a 75 bps increase. If this is the case, the forecasted move could lift the risk assets higher, similar to what happened after the July meeting.

Yet again, the hate hike alone is barely a clear signal, and traders must follow the Fed’s commentary on its decision. In July, the markets rallied despite the biggest hike since 1994.

What really triggered July’s rally was the post-meeting press conference, where Jay Powell explained that rate increases of this size wouldn’t be frequent going forward.

‘Today’s 75 basis-point increase is an unusually large one, and I do not expect moves of this size to be common,’ he stated back then.

Now that we see how widespread and unrelenting inflation is, a rate increase of this magnitude is not an ‘unusually large one’ anymore – the one announced tomorrow would be the third one in a row.

Consequently, investors have much less confidence that the Fed will become more dovish compared to July.

Top 7-day Gainers

With the largest cryptos deeply in red, the number of gainers among the crypto assets with a market cap of more than $150 million was abysmal.

According to CoinMarketCap data, only 10 cryptocurrencies with market capitalizations above $150 million ended this week higher, and only two finished with double-digit gains.

The meager gains across the wider crypto market further explain how rough this week’s correction was for the crypto market, as the crypto market was falling in line with the stocks.

$CHZ

The native coin of an entertainment-focused blockchain network and the creator of the Socios.com platform, Chiliz ($CHZ) is the biggest winner this week as it traded at $0.2378 at press time with a growth of 18.03% in the last week.

The coin is rising on the growing social media presence, with Chiliz’ seeing a nearly 60% increase in social mentions over the previous month. Increasing social engagement wasn’t the only driver for $CHZ’s appreciation.

Earlier this quarter, Chiliz revealed a partnership with FC Barcelona after Socios.com made a $100 million investment into FC Barcelona’s Web3 arm Barça Digital Entertainment.

$XRP

Ripple’s $XRP is among the gainers this week amid elevated trading volumes as traders speculate on the outcome of the SEC’s case against Ripple Labs, the company behind $XRP.

As Ripple is believed to be close to winning a protracted legal battle, $XRP climbed above the $0.40 level on Sept. 19 for the first time since July but retraced back after testing the $0.42 resistance line for now.

Top 7-day Losers

Here are the 2 coins that lost most of their value in the last week.

$NEAR

The native coin of a layer-1 blockchain, $NEAR, lost nearly 23% over the week that follows the announcement of the company’s $100 million VC fund targeting Web3 culture and entertainment in partnership with Caerus Ventures.

It was also the week of the annual ‘NEARCON’ conference held in Lisbon by the NEAR Foundation, where it revealed the next stage of its sharding roadmap with 200 new validators and the launch of $USDT on the Near blockchain.

The news of the ecosystem development helped $NEAR build momentum to advance gradually between September 7 and 12, with the token rising to its monthly high of $5.21 on September 12. As the conference ended, it came off as a ‘sell-the-news’ event, with $NEAR slipping below the $4 level.

$ADA

Cardano’s $ADA couldn’t break the downtrend ahead of the Vasil hard fork, bringing $ADA down 11% over last week, according to CoinMarketCap data. The decrease in the overall cryptocurrency market and the repeated delays of the network upgrade were likely to blame for the recent absence of positive price movement.

Yet, in the case of $ADA, even a 100% increase following the network upgrade – if implemented successfully – would not probably be enough to offset the losses of the long-term holders. As per CoinMarketCap data, $ADA is trading 80% down from last year.

$XMR, $DASH & $ZEC

The rout in privacy coins continues as the top assets fall for the second week following Huobi’s decision to suspend spot and futures trading for privacy tokens, Citing ‘Latest Financial Regulations.’ The recent delisting of the privacy coins may hint at the upcoming crackdown on privacy coins as crypto regulation is getting traction.

Dashed Hopes After The Merge Complete

Even though Ethereum’s transition away from Proof-of-Work to the Proof-of-Stake consensus mechanism was an absolute success on the technical side, the merge eventually became a ‘sell-the news’ event amid tightening market conditions.

Despite a series of upward swings in Ether prices since the Merge timeline was revealed in mid-July, the merge itself could not bring significant gains for $ETH. Instead, Ethereum is down nearly 8.5% since the merge, according to CoinMarketCap data.

Ether is trading at $1,345, although more than 4% higher than its local low seen in the European trading hours today. Ultimately, the merge could not instantly generate large buying interest amid selling pressure from miners and retail holders.

Meanwhile, the lack of institutional buying is noticeable on the demand side, as evidenced by the data on the $ETH investment product dynamics. According to data from CoinShares, $ETH funds saw their fourth straight week of outflows on September 16.

Many in the crypto community expected the 99.95% decrease in Ethereum’s energy consumption after the merge to act as a buying factor for institutional investors. With Ethereum reinventing itself as a greener, carbon-neutral blockchain, institutions that were barred from investing earlier due to ESG concerns could come around.

Yet, institutional investors turned out to be skeptical of the network’s overhaul in the short term. It wouldn’t be surprising if the trend reverses once the dust settles.

That being said, despite the short-time price action, Ethereum remains the “App Store” of the crypto world and continues to house some of the most valuable building blocks of the crypto space.


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