Crypto investors look through hawkish Fed minutes to focus on fundamentals
Bitcoin, the world’s largest cryptocurrency, lost some of its recent bullish momentum in the last 24 hours, falling below $24,000 from its seven-day peak of $25,100.
Much of this current volatility being experienced comes as investors turn their attention to the Federal Open Market Committee (FOMC) meeting minutes scheduled to be released today.
It’s not just the crypto market that is going through a temporary risk-off mode moment. Stock markets are shedding gains as traders position for further downside ahead of the minutes.
On Wall Street yesterday, the Dow Jones lost 2.06%, which was the index’s worst downturn since December 15. The S&P 500 lost 2%, whilst the tech-heavy Nasdaq pulled back by 2.5%.
The minutes will be poured over as they are likely to indicate how big the hawkish minority was within the Federal Reserve ahead of the January economic data releases, which included strong payrolls, stubborn inflation and robust retail sales.
Crypto investors – and equities traders amongst others – are worried that this sets the scene for the Fed to keep rates higher for longer.
Despite the expected hawkish tones from the Fed minutes, it’s becoming increasingly clear to all that we’re far closer to the ‘home run’ now.
Many experienced crypto investors will, sensibly, be prepared to look through any near-term inflation and interest rate news.
Instead, rightly, they will be focused more on the fundamentals of cryptocurrencies, such as Bitcoin.
Like many major corporations, financial institutions, governments, sovereign wealth funds, prestigious universities, and household-name investing legends, amongst others, they’ll remain confident that digital currencies are the inevitable future of money.
In our increasingly tech-driven, globalised world, it makes sense to hold digital, borderless, decentralised currencies.
In addition, adoption and demand are increasing all the time, whilst at the same time, supply is decreasing.
This will all be more front and centre in savvy investors’ minds, in my opinion, as they are less fixated on the month-on-month inflation reports and the Federal Reserve’s response.
Inflation seems to have peaked and investors are bullishly looking to the future, not in the rear-view mirror.
Indeed, no doubt that some of the shrewdest investors will be using the market volatility triggered by the anticipation of the Fed minutes as a buying opportunity. When used effectively and efficiently, volatility can be an extremely powerful investment strategy.
Whilst we expect the US Federal Reserve to go hard with its battle against inflation, we expect crypto investors to increasingly shrug off the FOMC’s hawkish tones.