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| Bitcoin's price movements over the last three months are seen in the graph above. Screenshot from CoinMarketCap |
By Lee Min-hyung
It is feared that major cryptocurrencies might tumble to a new low this year again amid diminishing investor sentiment after the U.S. Fed reiterated its hawkish pivot.
Prices of Bitcoin and Ethereum hit the bottom in June and have since shown signs of recovery on then-reviving sentiment, with investors now expecting the Fed to slow down the pace of monetary tightening.
Bitcoin was traded at around $19,000 in mid-June but displayed resilience by bouncing back to over $24,000 last week. Ethereum also showed a similar price movement during the same period. The rally was driven by hopes that the U.S. monetary authority would gradually reduce its hawkish rhetoric as the year-end approaches.
However, the momentum is losing steam amid reviving fears that the Fed might stay hawkish longer than expected after Fed officials reaffirmed its hawkish stance. This situation has raised the likelihood for the Fed to take another giant step of increasing its key rate by 75 basis points.
Given that reviving risks on steep interest hikes come as a major fear factor for crypto and stock investors, market analysts expected major digital assets to lose more ground until the upcoming Federal Open Market Committee (FOMC) meeting slated for September.
External macroeconomic conditions also don't bode well for major cryptocurrencies. The heightened uncertainty has raised the valuation of the U.S. dollar, with the won-dollar exchange rate setting a new high each day here. The dollar was traded at as high as 1,345 won on Tuesday morning amid growing demand for safe assets.
Crypto sentiment is forecast to fall further in line with stock declines here and abroad, according to analysts.
"The possibility of the Fed coming with a rate hike of 75 basis points in September has risen significantly after Fed officials delivered their hawkish remarks last week," NH Investment & Securities analyst Cho Yeon-joo said. "Risks on interest rates have resurfaced on fears that Fed Chairman Jerome Powell will also take a hawkish stance during the Fed's upcoming annual Jackson Hole meeting."
Edward Moya, a senior market analyst at OANDA, expected the upcoming FOMC meeting to be a crucial turning point in determining the future course of major cryptocurrencies.
"Despite decent moves with the dollar and Treasury yields, Bitcoin remains anchored between $20,000 and $25,000," the analyst said.
"The correlation with equities is coming and going for Bitcoin, but it seems a major move might have to wait until we have a firm handle on market expectations for the September FOMC meeting. If stocks continue to trade rangebound, it seems Bitcoin could do the same for the lead-up to the Jackson Hole Symposium. Bitcoin's fundamentals haven't changed much and that should keep it as the ultimate risky asset," he said.
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