Why Bitcoin, Ethereum and Shiba Inu Are Dropping Today

What happened

Shares of most cryptocurrencies fell over the weekend as digital assets and stocks could prepare for a turbulent week, with the Federal Reserve set to hold its July meeting, another major interest rate hike in store, and the subsequent The more important economic data to be in. Week.

In the last 24 hours, the price of the world’s largest cryptocurrency, Bitcoin (B T c -0.73%,, as of 9:13 am on Monday, had fallen around 2.6%. value of Ethereum (ETH) -0.86%, was down more than 3%, and the meme token Shiba Inu (Shib 0.40%, had fallen 3.5%.

So what

Like many tech stocks and riskier assets, crypto prices have plummeted this year as inflation soared and the Federal Reserve sharply increased its benchmark overnight lending rate, the federal funds rate. Riskier assets typically do not perform well in the face of rising interest rates because of the increased returns on safer assets, which demand higher earnings and returns than growth assets previously traded at premium valuations.

On Wednesday, the Fed’s rate-setting committee is widely expected to raise the federal funds rate by another 75 basis points (0.75%), but investors will look for clues in the Fed’s comments as to whether the Fed will raise the economy and future rate hikes. How does he see for the rest of the year. A more aggressive Fed could spell trouble for the stock market and crypto prices. However, if the Fed feels more comfortable about inflationary conditions and future economic prospects, asset prices may react favorably.

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“Although this week plays out, I suspect today will be the quietest day of the coming week [for crypto]Oanda analyst Jeffrey Haley wrote in a recent research note.

Along with more earnings reports, another major event that could affect crypto and broader market activity will take place on Thursday, when the US Bureau of Economic Analysis releases its estimates for gross domestic product (GDP) growth for the second quarter of the year. Will do

In the first quarter of the year, US GDP declined by 1.6% after growing nearly 7% in the fourth quarter of 2021. Two straight quarters of negative GDP growth technically indicate a recession. Goldman Sachs Earlier this month it lowered its GDP projections for Q2 to about 0.7%, which would keep the US barely out of a technical slowdown.

With a strong labor market and most large US banks reporting strong consumer spending in Q2, it doesn’t really look like the US economy is stuck in a recession, but a market downturn can be seen as the beginning , which may not be so favorable for riskier assets like cryptocurrencies.

now what

In the short term, I could see crypto prices going in either direction. A less aggressive Fed in the second quarter and better-than-expected GDP growth could signal to the market that the Fed may be able to contain inflation and engineer a softer landing than many had imagined in recent months.

This could be a good sign for crypto prices. But more bullish comments and weaker economic data could result in a downward movement.

Either way, I still see bitcoin and ethereum as good long-term investments given their growing adoption around the world and real-world use cases. It seems that Shiba Inu has no technical or fundamental investment thesis, so I would avoid meme tokens.

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Bram Berkowitz holds positions in Bitcoin and Ethereum. The Motley Fool positions and recommends Bitcoin, Ethereum and Goldman Sachs. The Motley Fool has a disclosure policy.

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