WASHINGTON (dpa-AFX) - Cryptocurrencies slipped in the aftermath of the Fed hinting at just one rate cut in 2024. The Fed had at the time of the previous FOMC in March hinted at three rate cuts in 2024.
Overall crypto market capitalization recorded an overnight erosion of more than 2 percent as markets digested the Fed's guidance.
The Federal Reserve, in its review on Wednesday acknowledged the economic activity continuing to expand at a solid pace, strong job gains as well as the low unemployment rate. The committee acknowledged that inflation has eased over the past year, recording a modest progress towards its 2 percent inflation objective. In this backdrop it decided to maintain the target range for the Federal funds rate at 5.25 to 5.5 percent for the 7th straight meeting. It also hinted at just one rate cut in 2024 and four cuts in 2025.
The Fed also published its latest assessment on inflation, economic growth and unemployment. In the Summary of Economic Projections issued on Wednesday, the Fed raised its inflation forecast for 2024 to 2.6 percent from 2.4 percent projected in March. Acknowledging the sticky inflation, the 2025 projection has been increased to 2.3 percent from 2.2 percent projected earlier whereas the 2026 level has been maintained steady at 2 percent. The Fed's forecast of growth has been maintained at 2.1 percent in 2024 and at 2 percent in 2025 and 2026.
Amidst the Fed toning down its rate forecast, signaling just one rate cut for the year, the median Federal funds rate projection has been raised to 5.1 percent at the end of 2024 from 4.6 percent projected in March. The median Federal funds rate projection for 2025 is 4.1 percent, a tad higher than the 3.9 percent projected in March. The projection for 2026 has been maintained at 3.1 percent. The long-run projection is at 2.8 percent versus 2.6 percent projected in March.
The Fed's hawkish hints eclipsed the jubilation in markets that followed the flat consumer prices revealed in the CPI update released on Wednesday morning. The CME Fed watch tool currently shows probabilities for rates remaining at the 5.25-5.50 percent level at 90 percent after the Fed review in July, 31 percent after the FOMC in September, 19 percent after the FOMC in November and 5 percent after the Fed's review in December.
With the Fed now signaling lesser rate cuts than what was estimated in March, crypto market sentiment has been impacted. Concerns about interest rates remaining elevated for some more time dampened sentiment for digital assets and dragged down prices of cryptocurrencies, typically non-interest bearing.
Bitcoin shed 2.7 percent in the past 24 hours and 4.6 percent in the past week to trade at $67,724.84. The slippage curtailed year-to-date gains to 60 percent. The leading cryptocurrency traded between a high of $69,977.89 and a low of $67,028.99 in the past 24 hours.
Sentiment remained weak despite the inflows of $100.8 million to Bitcoin Spot ETF products in the U.S. on Wednesday that halted 2 days of outflows. Data from Farside Investors had shown net outflows at $200 million on Tuesday and $64 million on Monday. Ethereum plunged 4.2 percent in the past 24 hours to trade at $3,494.86. Despite weekly losses of 8.9 percent, the leading altcoin has added more than 53 percent in 2024.
Bitcoin dominates 54.3 percent of the overall crypto market followed by Ethereum that has a 17.1-percent market share. With a market cap of $163 billion, stablecoins account for 6.6 percent of the overall crypto market.
4th ranked BNB (BNB) shed 3.4 percent overnight to trade at $606.65.
5th ranked Solana (SOL) slipped 6.6 percent overnight and more than 13 percent in the past 7 days. SOL is currently trading at $149.95.
7th ranked XRP (XRP) lost 1.4 percent overnight to trade at $0.4872.
Dogecoin (DOGE), ranked 8th overall has also shed 1.3 percent in the past 24 hours to trade at $0.1435.
9th ranked Toncoin (TON) rallied 3.7 percent overnight to trade at $7.50. TON is the highest-ranking crypto to trade with overnight as well as weekly gains. TON also topped overnight gains among the top-100 cryptocurrencies.
10th ranked Cardano (ADA) declined 2.4 percent overnight and 6.4 percent over the past week. ADA is currently trading at $0.4294.
90th ranked Akash Network (AKT) topped overnight losses with a decline of more than 14 percent.
61st ranked Brett (BRETT), 50th ranked FLOKI (FLOKI), 54th ranked Bonk (BONK) and 42nd ranked dogwifhat (WIF) have all slipped more than 12 percent in the past 24 hours.
Meanwhile, Terraform Labs and the SEC have reportedly reached an agreement whereby subject to court approval, Terraform Labs would pay $4.47 billion in penalty to resolve the SEC's lawsuit. According to the filing made on Wednesday at the U.S. District Court of the Southern District of New York, the amount includes disgorgement totaling $3.59 billion, prejudgment interest of $0.46 billion and a civil penalty of $0.42 billion.
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