Optimism creeps back into crypto, with the 2022 test still to come
Cryptocurrencies are showing signs of optimism following a Federal Reserve interest-rate hike, though traders remain cautious due to historical volatility. Market participants are weighing current price trends against macroeconomic factors like inflation and Treasury yields.
Why it matters
The crypto market's reaction to monetary policy provides insight into how digital assets are increasingly correlated with traditional financial indicators.
Cryptocurrencies rallied after the Federal Reserve delivered its first interest-rate increase since July 2023, a counterintuitive reaction given the FOMC decision makes interest-bearing investments more attractive.
Bitcoin BTC $76,330.19 added almost 1% over the past 24 hours while zcash (ZEC) jumped by more than 23% to a record high.
Traders who remember previous Fed rate cycles, especially 2022, are likely to be cautious, however.
Bitcoin is currently about 40% below its October record high of $126,000. When the Fed began tightening in March 2022, it was also roughly 40% below its record high, the November 2021 peak.
Over the next 12 days, the largest cryptocurrency rallied 18% before sliding 50% for several months, a period that also saw the collapse of crypto exchange FTX.
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