5 Things to Know in Crypto Today: BTC Stabilizes Above $21K, ETH in mid-$1.4Ks Pre-Fed

Key Points

• Strong earnings from mega-cap US stocks have helped boost stock market sentiment, supporting crypto prices.
• Major coins are now consolidating ahead of Wednesday’s Fed policy announcement.
• Bitcoin was last trading in the low-$21,000s and Ethereum in the mid-$1,400s.

Crypto Stabilizes as Equities Rally on Strong Earnings

Major cryptocurrencies are consolidating on Wednesday, with sentiment is a little more upbeat ahead of a key policy announcement from the US Federal Reserve later in the day. Strong earnings from the likes of US mega-cap giants Microsoft and Alphabet (Google’s parent company) has sent their shares 4-5% higher in pre-market trade and is lifting the major US index futures ahead of the US open. Nasdaq 100 index futures were last up over 1.5% while S&P 500 index futures were last up just over 1.0%.

Bitcoin had dipped as low as the $20,700 area on Tuesday but has since recovered to around $21,300 in tandem with the better mood in stock markets. However, the world’s largest cryptocurrency by market capitalization continues to trade below its 50 and 21-Day Moving Averages at $21,800 and $21,550 respectively and with losses on the week of still more than 5.0%.

Ethereum, meanwhile, has recovered from a slump as low as the $1,350s on Tuesday and is currently trading above $1,460. The world’s second-largest cryptocurrency by market cap is still nursing losses of close to 9.0% on the week. In terms of the other major altcoins, the likes of BNB, XRP, ADA, SOL and DOGE were all between flat and up by around 3% in the last 24 hours, according to CoinMarketCap.

How Crypto Might React to the Fed’s Policy Announcement

The Fed is expected to lift its target interest rate range by 75 bps for a second successive meeting to 2.25-2.50% from its current 1.50-1.75% level. Markets price a slim (roughly 25%) chance that the Fed might go bigger with a 100 bps rate hike, given the upside surprise in headline consumer price inflation figures released earlier this month for June.

But most analysts think that with core consumer price pressures looking now to have peaked, with commodity prices having moved lower and with inflation expectations also seeming to have peaked, the Fed will go with another 75 bps move. Bear in mind that the economy continues to show significant strain; consumer sentiment has been in the dumps for some time and this has been weighing on consumption in recent months, while business survey data (like last Friday’s PMI data) is increasingly showing a slowdown in economic activity.

These negative recent economic developments likely further reduce the chance of a jumbo 100 bps rate hike. This means that there is room for a small initial positive reaction in stock and crypto markets as hawkish 100 bps rate hike bets are immediately priced out (assuming the Fed does go with a 75 bps hike).

Much more important for markets will be Fed Chair Jerome Powell’s tone on the economy and outlook for further rate hikes in the months ahead. The Fed is likely to reiterate its nimble/take things meeting by meeting stance. But any indications that the Fed is becoming a little less worried about the inflation outlook and a little more worried about slowing growth could come across as dovish and boost stocks and crypto.

Coinbase Shares Tank on SEC Investigation News

Coinbase Global’s share price fell more than 20% during Tuesday’s US equity market trading hours after news broke that the US Securities and Exchange Commission (SEC) is investigating the US-based cryptocurrency exchange on suspicion that it may have listed unregistered securities.

The new investigation into Coinbase comes after the SEC claimed last week in a new insider trading lawsuit that seven cryptocurrencies currently listed on Coinbase are actually securities. Analysts think that if the SEC does rule that most cryptocurrencies are indeed securities, this could cripple a good portion of the market.

Kraken Under Investigation for Alleged Sanctions Breaches

According to a New York Times report on Tuesday, the US Treasury Department is investigating cryptocurrency exchange Kraken for potential violations of US sanctions. US authorities reportedly suspect that Kraken allowed users to access its services from Iran, a violation of sanctions that have been in place on the country since 2019.

The NYT said that the US Treasury is likely to hit Kraken with fines and that a timeline for enforcement isn’t clear. In a statement, Chief Legal Officer Marco Santori said that “Kraken has robust compliance measures in place and continues to grow its compliance team to match its business growth”. Moreover, “Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues”.

FTX In Discussions to Buy Bithumb

Major global cryptocurrency exchange FTX is in talks to purchase South Korean crypto exchange Bithumb, reported CNBC on Tuesday. Reportedly, Bithumb owner Vidente is mulling a full sale of Bithumb, or a partial sale, with the company not having made a final decision just yet.

Despite the ongoing so-called crypto winter, FTX has been making moves to expand its crypto market presence in recent months. The crypto exchange agreed to provide crypto lending platform BlockFi with a $400 million revolving credit facility back in June and may acquire the firm for as much as $240 million.