federal reserve

Don't get excited about Fed 'dovishness' — another rate hike is in the cards

Contrary to Jerome Powell’s intimations, inflation is likely to rise in the months ahead. If the Fed does not hike rates in 2024, the problem will get worse.

December’s Federal Open Market Committee (FOMC) meeting was a huge boon for markets. Risk assets — including cryptocurrencies — soared as the central bank appeared to take a more dovish stance on monetary policy. But the markets may be in for a nasty surprise in 2024 as the Federal Reserve faces an uphill battle against price increases, which may well force policymakers to hike again to reach their 2% inflation target.

The overwhelming expectation right now is that the Fed has won its battle against inflation. However, this is not what economic analysis shows. In fact, the recent slowdown in price growth is very likely to prove temporary — with inflation soaring again next month to finish the year around 3.5%, and remaining sticky well into 2024. This will be problematic for the central bank, whose dual mandate stipulates it must control prices while maintaining maximum employment.

So far, it has certainly succeeded with the latter. Unemployment remains at historically low levels, dropping from 3.9% in October to 3.7% in November. The economy added 199,000 jobs that month, beating analysts’ expectations. Wage growth also continued to outstrip inflation for the fifth month in a row in October, rising again to 5.7% after a brief hiatus.

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Why is Cardano (ADA) price up this week?

ADA price had gained nearly 80% in a month and data suggests the rally could continue.

Cardano (ADA) recorded an impressive 43% gain in the seven days leading up to Dec. 14, reaching its highest level since May 2022. The rapid increase to $0.64 has pushed Cardano’s market capitalization to $22.7 billion, an interesting point to note, as it matches the valuation of Danske Bank (DANSKE.CO), Denmark’s largest bank, which serves over 5 million retail customers.

While ADA’s market cap is quite impressive, it’s essential to recognize that decentralized protocol valuations differ significantly from traditional financial assets. Traditional assets rely on generating revenue to cover expenses, including financing costs and operational overhead. On the other hand, Cardano is a decentralized protocol, so its market capitalization does not depend on sales and earnings. Nevertheless, it’s important to analyze the potential reasons behind ADA’s price increase to determine if further gains are possible.

Constructing a narrative for Cardano’s recent success is relatively straightforward, but pinpointing the specific events responsible for the 70% gain in December is more challenging. For instance, a post on the social network X by user @matiwinnetou brilliantly highlights the driving factors behind this bullish momentum.

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Why is Cardano price down today?

Cardano’s price is down today as traders secure profits at ADA’s overbought levels ahead of a key Federal Reserve rate decision.

Cardano’s (ADA) price is down today, falling 7.75% in the last 24 hours to hit $0.55 on Dec. 13.

Let’s discuss factors that have been driving the Cardano prices lower recently.

From the technical perspective, ADA’s price drop today is part of a correction cycle that started on Oct. 9, when ADA’s price reached its 18-month high of $0.64.

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US Fed 2024 rate cut could prove perfect catalyst for BTC halving

A cut in the U.S. Federal Reserve rate is seen as bullish, as it boosts risk appetite among investors.

Goldman Sachs, the second-largest investment bank in the world, has predicted that the United States Federal Reserve could cut interest rates twice in the next two years, starting as early as the third quarter of 2024. 

Interest rates have a strong correlation to investors’ risk appetite. Goldman Sachs predicted the first Fed rate cut by December 2024, but this forecast has been brought forward to Q3 of 2024 due to cooling inflation, Reuters reported on Dec. 11.

The lender expects the two Fed cuts to bring interest rates to 4.875% by the end of 2024, rather than its previous forecast of 5.13%. 

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Why is Cardano price up today?

Cardano price continues its rebound move in December, with ADA price up 75% already as altcoins catch up to Bitcoin’s rally.

The price of Cardano (ADA) jumped over 19% to $0.64 on Dec. 9, its highest level in 18 months. It’s up 75% in December alone. 

Cardano’s recent gains did not accompany any groundbreaking fundamentals. Instead, they appeared on the cryptocurrency market catching up to Bitcoin (BTC) this month.

Notably, Bitcoin’s crypto market dominance has declined 3.5% from its Dec. 6 local peak, indicating that many traders have been rotating capital out of the Bitcoin market to seek profit opportunities in altcoins. That has benefited Cardano, whose market share has jumped over 46% since Dec. 6.

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Bitcoin price hits $39K as Powell stirs bets Fed rate hikes are over

Bitcoin reaches levels not seen since May 2022 amid an excited market reaction to the latest Fed inflation commentary.

Bitcoin (BTC) hit $39,000 for the first time since mid-2022 on Dec.

BTC/USD 1-hour chart. Source: TradingView

Powell: Calling end to hikes would be “premature”

Data from Cointelegraph Markets Pro and TradingView confirmed a new 19-month BTC price high of $39,000 on Bitstamp.

Bitcoin bulls, already in a strong position, beat out resistance as Fed Chair Jerome Powell took to the stage at Spelman College in Atlanta, Georgia for a scheduled appearance.

“The FOMC is strongly committed to bringing inflation down to 2% over time and to keeping policy restrictive until we’re confident that inflation is on a path to that objective,” he said in prepared remarks.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease.”

While keeping his tone cautious, Powell appeared to boost risk asset sentiment with his comments on the current state of the U.S.

Reacting, financial commentary resource The Kobeissi Letter was among those with a more sober take on what the Fed might do in the future.

“Their narrative has not changed since last year, but markets continue to call for a Fed pivot,” it wrote in part of a post on X (formerly Twitter).

“As we have stated before, the Fed would rather spark a mild recession than risk a resurgence of inflation.

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BTC price heading under $30K? 5 things to know in Bitcoin this week

Bitcoin faces a battle for key BTC price support to start the week, while market participants stay optimistic about trend continuation.

Bitcoin (BTC) starts a new week under $30,000 as analysts’ predictions of a short-term support retest come true.

The largest cryptocurrency saw a classic dive following its latest weekly close as the latest gains evaporated, but will they return?

Ahead of a fairly innocuous week for macro data releases, catalysts are likely to come elsewhere as BTC price action decides on a key support zone.

Much is at stake for traders, as the week prior offered the opportunity to reinvestigate altcoins as Bitcoin itself cooled its upside. With a retracement now in effect, attention will be on whether those altcoins can hold at their own higher levels.

Under the hood, it appears to be business as usual for Bitcoin, with network fundamentals already at or near all-time highs, showing no definitive signs of a comedown this week.

It may be too early to determine how price performance will impact hodlers, but the temptation to sell at 10-month highs must be clear, with the percentage of the overall BTC supply now in profit at an impressive 75%.

Cointelegraph takes a look at these factors and more in the weekly rundown of potential Bitcoin price triggers.

BTC price: $30,000 hangs in the balance

After a “boring” weekend for BTC price action, volatility returned in classic style at the April 16 weekly close.

With it came a return to $30,000 for BTC/USD, marking its first major support retest since hitting 10-month highs above $31,000 last week.

Traders and analysts had widely predicted the move, arguing that it would constitute a healthy retracement to prepare for the continuation of the uptrend.

Cointelegraph contributor Michaël van de Poppe, founder and CEO of trading firm Eight, was among those eyeing a buy-in just below $30,000 but kept his options open in the case of a deeper correction.

“Bitcoin is getting towards the long areas. Back towards the range low, through which a sweep can be granted as an entry point towards $32K,” he told Twitter followers.

“$28,600 could also be a long entry, but then I think we won’t be starting to make new highs, for now.”

BTC/USD annotated chart. Source: Michaël van de Poppe/ Twitter

Analytics resource Skew noted how the dip had played out on exchanges, mentioning a “clean divergence” between spot sellers and derivatives traders.

“This is exactly the BTC retest I was talking about,” popular trader and analyst Rekt Capital meanwhile continued, striking an optimistic note.

“$BTC is currently successfully retesting the top of the Bull Flag price broke out from a few days ago. Hold here would be a good contributing sign for continuation.”

An accompanying chart showed BTC/USD close to resting on an important trend line on daily timeframes.

BTC/USD annotated chart. Source: Rekt Capital/ Twitter

A more cautious Daan Crypto Trades nonetheless flagged a tug-of-war between bulls and those simply trading the current range.

“Bitcoin Range Traders having the time of their lives while breakout traders are getting trapped on these range deviations/wicks,” part of commentary stated on the day.

“Likely to keep ranging until one side gives up.”

BTC/USD annotated chart. Source: Daan Crypto Trades/ Twitter

Earnings dominate macro debate

After a key week of macroeconomic data releases, the coming days are set to offer risk asset traders some comparative respite.

United States jobless claims and manufacturing figures will come toward the end of the week, but the macro focus will be elsewhere — specifically on earnings.

These are due, among others, from heavyweights Tesla and Netflix, as well as a slew of banks — all keenly watched by market participants in the wake of recent events.

“Earnings season is officially here,” financial commentary resource The Kobeissi Letter summarized.

Last week, Tedtalksmacro, a financial commentator also focusing on crypto, summed up the current environment as highly favorable to continued Bitcoin upside.

“Price breaking bear market structure, macro data trending favourably, momentum oscillators reset + USD liquidity higher than pre-tightening levels… Yet the majority continue to look for swing shorts to new lows,” he stated.

“~500 days of bear has created a strong recency bias…”

However, the picture appears muddier when it comes to stock markets themselves, with consensus among market participants being hard to ascertain.

Sven Henrich, CEO of NorthmanTrader, called for more proof of a breakout for the S&P 500 “bull market” narrative to become valid.

“Some day they will be correct, but in my view, based on history, a new bull market is not confirmed until $SPX moves above the monthly 20MA and SUSTAINS such a move, i.e. defends it as support,” part of a tweet read last week.

Henrich was considering a claim by Tom Lee, managing partner and the head of research at Fundstrat Global Advisors, who described bears as “trapped.”

“The other measure here is the weekly 100MA which is just above 4200. While developments have been technically bullish since the October lows markets are near these key resistance points with the $VIX on the floor of its multi year uptrend,” Henrich continued.

“Will recent liquidity injections, which have contributed to suppressed volatility, be enough to sustain a move above resistance as the economy is approaching a recession per the Fed staff? That’s the big question I suppose everybody has to ask themselves.”

S&P 500 vs. VIX volatility index chart. Source: Sven Henrich/ Twitter

Bitcoin mining difficulty eyes fifth record-high in a row

In what is becoming a bi-weekly regular, Bitcoin network fundamentals are offering nothing but new all-time highs.

This week, difficulty is due to inch higher — currently by an estimated 0.45% — according to estimates from monitoring resource BTC.com.

Bitcoin network fundamentals overview (screenshot). Source: BTC.com

This will mark the fifth increase in a row, which has not happened since February 2022.

Since the start of 2023 alone, over 4 trillion has been added to the difficulty tally, while the hash rate is also continually setting new highs.

Raw data from MiningPoolStats recently estimated the latest all-time high as 413.4 exahashes per second (EH/s) on April 15. On Jan. 1, the estimated hash rate was 285 EH/s.

Bitcoin hash rate raw data (screenshot). Source: MiningPoolStats

As Cointelegraph previously reported, however, hash rate changes in and of themselves may not be relevant as a yardstick for Bitcoin health if measured using exact figures.

As Jameson Lopp, co-founder and chief technology officer of Casa, stated in a new blog post released on the same date as the all-time high hash rate estimate, all may not be as it seems.

“Whenever you see someone claiming that a change in the network hashrate is newsworthy, you should always question the method and time range used to achieve the hashrate estimate,” he summarized after comparing various methods of hash rate estimation.

In Bitcoin, only old hands remain

As $30,000 appears and gets tested as support, the temptation to sell among those who weathered the 2022 bear market is increasing.

Mean on-chain transaction volumes have hit multimonth highs, according to data from analytics firm Glassnode.

BTC mean transaction volume. Source: Glassnode

Overall, more than three-quarters of the mined BTC supply is now in profit — the most in a year and arguably a clear incentive to take some of that profit off the table.

BTC % addresses in profit. Source: Glassnode

Analyzing market composition, Glassnode lead on-chain analyst Checkmate had some encouraging conclusions.

Long-term holders currently outnumber short-term holders or speculators significantly, with the 2022 bear market sparking a shakeout that has left the market more resilient to price fluctuations.

“Nobody except the hardcore HODLers remains, nobody knows we’re up 100% from the lows. They will probably only be back for real as we approach ATHs,” he predicted in part of a tweet this week.

Checkmate added that “Almost none of the folks who have been here for several months+, are spending right now.”

“They appear to require and demand higher prices before they sell. I certainly know do,” he wrote.

Crypto “greed” inches from November 2021 peak

Bitcoin may be far from its all-time high of $69,000, but one metric rapidly homing in on repeating the climate of November 2021 is the Crypto Fear & Greed Index.

Related: What is the Crypto Fear and Greed Index?

The return to $30,000 was marked by a rapid increase in “greed” throughout the crypto market, its data shows.

As of April 17, Fear & Greed scored 69/100, just 10% away from its 75/100 mark from when BTC/USD traded at its most recent peak.

Cointelegraph has often reported on the potentially overheated atmosphere within sentiment this year, and now nerves appear to be spreading.

“Now this isn’t a metric I swear by as it is lagging, but it gives a good indication of when to look to de-risk and be cautious,” popular trader Crypto Tony reasoned about the Index over the weekend.

“The last time we came up to the 75 region was back on November 7th 2021 when Bitcoin was trading at over $65,000. Food for thought.”

Crypto Fear & Greed Index (screenshot). Source: Alternative.me

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

A recession is coming — Here’s how it’s fueling Bitcoin

Cointelegraph analyst and writer Marcel Pechman explains how a potential looming recession might be causing Bitcoin’s price to rise.

The show Macro Markets, hosted by crypto analyst Marcel Pechman, which airs every Friday on the Cointelegraph Markets & Research YouTube channel, explains complex concepts in layman’s terms and focuses on the cause and effect of traditional financial events on the day-to-day crypto activity.

The International Monetary Fund (IMF) and the United States Federal Reserve foresee an impending economic recession, which is the topic of today’s episode by crypto analyst Pechman. The video explains how the U.S.’s record-low unemployment rate could be hiding a bigger issue caused by inflation.

Pechman explains that the S&P 500 being only 13% below its all-time high has been driven by investors moving away from fixed income and why inflation is no longer a primary concern. Finally, there’s the link between the banking crisis, a weaker U.S. dollar and Bitcoin’s recent rally above $30,000.

The next segment of Macro Markets focuses on the bank’s leverage ratio. There’s a growing concern that financial institutions are lacking the capital to cover their risks, but that’s not what the most recent data has shown. The culprit, in Pechman’s view, is unrealized losses. Basically, banks are holding debt instruments that are paying way below their cost of capital.

If you are looking for exclusive and valuable content provided by leading crypto analysts and experts, make sure to subscribe to the Cointelegraph Markets & Research YouTube channel. Join us at Macro Markets every Friday.

Wyoming defends crypto-friendly bank charter regime in Custodia Bank’s lawsuit with Fed

“The State of Wyoming believes that this changes the tenor of the suit and in turn questions the legitimacy and viability of the State’s statutory framework,” said Attorney General Bridget Hill.

The U.S. state of Wyoming has requested to intervene in the case between Custodia Bank and the Federal Reserve System, seeking to defend its framework allowing certain crypto firms to qualify as state-chartered banks.

In an April 10 court filing, Wyoming Attorney General Bridget Hill filed a motion to “intervene in the defense” of the state’s regulation of Special Purpose Depository Institutions, or SPDIs. Custodia — called Avanti at the time — was the first financial institution to be approved for a bank charter under the SPDI framework, in October 2020.

Custodia filed a lawsuit against the Federal Reserve and its Kansas City arm in June 2020 for delays in approving the bank’s application for a master account, which facilitates an institution’s ability to make international transfers as well as other functions. In January 2023, the Fed officially rejected the bank’s application, saying it was “inconsistent with the required factors under the law.”

“The [report] the Kansas City Fed provided Custodia makes clear that its view of perceived inadequacies in Wyoming’s laws and regulations for SPDIs is partially responsible for its denial,” said the court filing. “The State of Wyoming believes that this changes the tenor of the suit and in turn questions the legitimacy and viability of the State’s statutory framework.”

Though Custodia filed its lawsuit in June 2022, the Fed released a report in March in which the central bank raised concerns about Custodia “seeking to focus almost exclusively on offering products and services related to the crypto-asset sector.” Custodia spokesperson Nathan Miller told Cointelegraph at the time that the Fed’s decision was an example of “shortsightedness and inability to adapt to changing markets.“

Hill pointed to the Fed’s arguments that suggested Custodia was akin to an uninsured institution “seeking to engage in multiple high risk endeavors in a high-risk industry” as part of the state of Wyoming’s concerns. The Attorney General said the Wyoming Division of Banking had issued guidance on capital requirements for the state’s SPDIs.

“[The Fed has] also expressed skepticism over the aptitude of ‘new’ state-chartered banks while allowing ‘old’ state-chartered banks like BNY Mellon to engage in substantially the same digital asset custody activity Wyoming SPDIs intend to engage in,” said Hill. “A disregard of Wyoming’s right to charter depository institutions in the two-tier banking system appears, at least in part, to be the motivation for this disparate treatment and disregard of Wyoming-chartered banks.”

Related: Wyoming’s private keys bill addresses growing threat to rights and assets

The court battle could become a defining moment for how financial institutions in the United States seeking to provide crypto custody services choose to get a charter under the federal or state system. BNY Mellon launched its digital custody platform in October 2022 — the first major U.S. financial institution to do so — while the Office of the Comptroller of the Currency approved charters for Paxos, Protego, and Anchorage as national trust banks in 2021.

Magazine: The legal dangers of getting involved with DAOs

Presidential hopefuls RFK Jr. and Ron DeSantis rail against FedNow

The two presidential hopefuls are of the opinion that FedNow is the first step in launching a CBDC that threatens privacy and autonomy.

Presidential hopefuls Robert F. Kennedy Jr. and Ron DeSantis are railing against the Federal Reserve’s FedNow payments system, claiming it would pave the way for a central bank digital currency.

In an April 11 Twitter thread, Democrat RFK Jr. — the nephew of former president John F. Kennedy Jr. — once again sounded the alarm bells over CBDCs, describing them as the “ultimate mechanisms for social surveillance and control” as he questioned the Fed’s claims that FedNow wouldn’t be used to facilitate a CBDC:

“The claim that FedNow is not the first step toward a CBDC would be more easily digestible were we not aware of the Biden administration’s steady barrage of hostile broadsides against cryptocurrencies.”

He added that cryptocurrencies like Bitcoin (BTC) “give the public an escape route from the splatter zone when this bubble invariably bursts” and claimed that Joe Biden’s administration was “colluding with the banksters to keep us all trapped in the bubble of profiteering and control.”

RFK Jr. filed his candidacy documents on April 5 and has been highly critical of CBCDs, stating last week that they “grease the slippery slope to financial slavery and political tyranny.”

FedNow is a 24/7 instant payments system that is slated to launch in July with the aim of speeding up transfers between financial institutions and businesses while also providing a government-backed alternative to similar networks provided by the private sector.

The Fed has played down talk of the system potentially being integrated with a CBDC. On April 8, it addressed a series of frequently asked questions by saying that “no decision” has been made to issue a CBDC and it “would not do so without clear support from Congress and the executive branch, ideally in the form of a specific authorizing law.”

In an April 11 tweet responding to the Fed’s statement, Florida’s Republican Governor DeSantis stated that it is “not merely ‘ideal’ that major changes in policy receive specific authorization from Congress; it is constitutionally required.”

“Unaccountable institutions cannot impose a CBDC on Americans,” DeSantis said. “They will tell us that [a] CBDC won’t be abused but we are wise enough to know better. This wolf comes as a wolf.”

DeSantis is reportedly eyeing a presidential run himself and has also been pushing back against CBDCs. On March 20, he called for a ban on CBDCs in Florida, citing concerns over their potential use for surveillance and control over citizens.

However, some remain unconvinced of these statements.

Related: CBDCs ‘threaten Americans’ core freedoms’ — Cato Institute

Speaking with NBC News on April 7, Aaron Klein, a former United States Treasury official and chief economist at the Senate Banking Committee, argued that the privacy-related concerns held by JFK Jr. and DeSantis are misplaced.

Klein noted that financial institutions are already required to report transaction data under current anti-money laundering and terrorism financing laws, and as such, a CBDC wouldn’t encroach on privacy any further.

“What [DeSantis] is getting wrong is this idea that there’s more reporting if there’s a central bank digital currency than if it’s a commercial bank digital currency,” he said.

Klein also spoke to AFP Fact Check on April 11 and emphasized that FedNow is purely focused on speeding up current Fed payment rails.

“There is no difference in privacy or surveillance whether you are using your Visa card or a CBDC,” Klein said, adding that FedNow and CBDCs have “nothing to do with the other.”

Magazine: Unstablecoins: Depegging, bank runs and other risks loom