March 23, 2023 – As expected, the Fed decided to increase interest rates by 25bps to 4.75%-5.00%. Then, the market paid attention to the Fed’s governor’s comments after the rate decision announcement. Jerome Powell changed the tone of his previous comments, highlighting that the continuation of the interest rate hikes would not be a certainty, which some market participants took as dovish. However, BTC prices went down right after the announcement in an apparent “buy the rumor, sell the news” behavior, in our view.
After trading around US$27k overnight, Bitcoin prices soared this afternoon getting back above US$28k with no relevant macro newsflow. What seems to be happening is that short-term investors took profits with the price surge in anticipation of the Fed’s rate decision. Moreover, a smaller part of investors believed that the US central bank could have kept the interest rate unchanged. With subsequent frustration of such expectation, there was a relevant amount of long positions liquidation in the Bitcoin futures market. In our view, this was usual market volatility following a well anticipated macro event. Today’s price surge seems to be a realization that the Fed’s appetite for further interest rate hikes has been diminishing.
Despite Bitcoin’s price resilience and renewed store of value narrative, the US securities regulator SEC is doubling down its attacks against the crypto industry. The agency has notified the US-based crypto exchange Coinbase against potential violation of securities laws in the running of the company and providing staking services. Coinbase’s shares dropped ~15% after the communication. In parallel, The SEC sued Justin Sun, founder of the Tron blockchain, on allegations of fraud and market manipulation. It has become clear for us, at least, that the SEC and other US regulators are trying to choke the crypto industry. However, we think this will end up backfiring, with innovative companies leaving the country.
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