The FED: An unquestionable monetary authority.

Crypto-currencies are still struggling to recover since the virtual currency crisis began this year. The volatility of crypto-currencies does not reassure investors who remain hesitant following the global inflation that does not weaken. Crypto-currencies were created to escape the control of banks: especially interest rates and inflation that nibbles away at wealth little by little. Very quickly this founding idea of crypto-currencies lost all its credibility because it was contradicted by decisions of the monetary authority which is the FED. The decisions of the US Treasury terribly affect the crypto-currencies and push them further into the crisis that started in October last year. So the idea of crypto-currencies being independent of the monetary control of banks and central banks is a myth.

The decisions of the US central bank have a strong implication on the assets of crypto-currencies. The FED’s historic decision to raise key interest rates last Wednesday continues to affect crypto-currencies. This decision was expected by economists for a few weeks. The key interest rates went up by 0.25%. And they will continue to rise by 0.25% with an increase of between 0.25% and 0.50% each quarter throughout the year. This increase, considered modest, could be the end of the game. The FED had kept its key rates at zero since then to stem the consequences of the 2008 housing crisis. We are already wondering about the consequences of this FED move.  

The fate of crypto-currencies is now hanging on the decisions of the US central bank.  Already during the wait for the announcement of the FED’s decision the crypto-currencies were in uncertainty. The crypto asset markets were tormented by the decision which would likely cause crypto currencies to fall further.  It was highly likely that a decision by the US central bank would have catastrophic effects on crypto-currencies. The concern had spread to all investors. And for good reason, the prices of crypto-currencies have fallen dangerously in recent weeks. The bankruptcy of FTX, the second largest crypto asset exchange platform has had even more damaging effects on the markets, causing an unprecedented downward trend in crypto currency prices. We will come back to this bankruptcy in our next article. But already it is important to remember that the very negative impact of last week’s FTX bankruptcy may get even worse with even more painful decisions from the FED on the crypto-currency markets.

The decisions expected this Wednesday after the U.S. central bank meeting will deal an even bigger blow to the financial markets. The seismic effects caused by the falling traditional financial markets will be felt in the crypto-currency markets which are struggling to recover. With its overall capitalization dropping by 4.03% in the last few days, it is already apparent that the crypto-currency markets are already expecting a negative outcome from the FED’s decision this week. Its capitalization is located around 802.03 billion dollars. It is certain that this will fall further.

The first victims of this depressing state of the crypto-currency markets are obviously the leaders of these virtual currencies. These are Bitcoin and Ethereum. These crypto-currency leaders are falling. Bitcoin has lost more than 3.15% in the last few days and it will continue its decent in the next few days. And during the same period, Ethereum the largest altcoin has also lost more than 7.25 of its capitalization.

Other altcoins among the top 10 in the capitalization market have also fallen. Binance (BNB) is down 4.19%, Ripple (XRP) is down over 8.79%, and Cardano(ADA) loses a value of 6.69% while Dogecoin (DOGE) and polygon(MATIC) have lost up to more than 10.02% and 7.08% respectively during the past few days.

With all this decency, investors preferred to wait for the US central bank’s decision to react. As the exponential moving average EMA has fallen from 9 EMA to below 20 EMA in the last few days, the nervousness has spread to all investors. The slightly downward trend is therefore mainly due to the refusal of the latter to take risks to protect the even more difficult positions of bitcoin, which keeps on falling.

For the moment the news from the US central bank has not caused the catastrophe that crypto currency investors feared. Instead, the trend has been positive. Ethereum has recovered. Its price has placed itself above 1.150 USD, which is slowly approaching it close to the major hurdle to break back out located between 1.230 USD and 1.250 USD.