5 Things to Know in Crypto Today: Dovish 75 bps Fed Hike Sends Crypto Surging Pre-US GDP

Key Points

• Cryptocurrency prices surged in wake of a “dovish” 75 bps rate hike from the Fed on Wednesday.
• Bitcoin was last changing hands just under $23,000, while Ethereum is above $1,600.
• Focus has turned to upcoming US GDP growth data for Q2 which could confirm the US has entered a technical recession.

Crypto Rallies After Dovish Fed 75 bps Rate Hike

Cryptocurrency markets surged on Wednesday in wake of what analysts saw as a “dovish” 75 bps rate hike from the US Federal Reserve. The central bank lifted interest rates to 2.25-2.50%, above pre-pandemic levels and back to roughly in line with the so-called “neutral” rate.

The Fed acknowledged recent softening in the US economy and acknowledged recent favorable developments relating to global commodity prices and inflation expectations, with falls in both modestly easing inflation fears. Powell reiterated the Fed’s nimble, meeting-by-meeting approach to rate hikes and markets responded by reducing their Fed rate hike bets for the remaining three meetings this year, whilst boosting rate cut bets for 2023.

Speculative risk assets including US tech stocks and crypto surged. The Nasdaq 100 finished Wednesday’s session up more than 4.0%, while Bitcoin and Ethereum surged 8% and 13% respectively. BTC was last changing hands just below $23,000, having neared $23,500 in earlier Thursday trade and is now comfortably back above both its 21 and 50-Day Moving Averages.

Bitcoin bulls are eyeing a test of last week’s highs in the mid-$24,000s. Ethereum, meanwhile, was last changing hands just above $1,600, having hit fresh multi-week highs in the $1,670s earlier in the day. ETH bulls continue to target a test of the key $1,700 resistance area. In terms of the major altcoins, the likes of BNB, XRP, ADA, SOL and DOGE were all up 5-8% in the last 24 hours, as per CoinMarketCap.

Markets Brace for US GDP Figures

Cryptocurrency traders are now bracing for the release of US GDP figures for the second quarter. According to a Reuters survey of economists, the US economy is expected to have grown at an annualized rate of 0.5% in Q2. Some analysts have argued that in wake of data released earlier this week that showed a surge in exports in the latter stages of Q2, Q2’s growth figure could be even higher.

If growth was to come in negative for the quarter, that would confirm that the US entered into a so-called technical recession in Q1 2022 (defined as two consecutive negative quarters of growth). However, given that the labor market has remained strong thus far this year, most economists would be reluctant to classify a H1 2022 technical recession as an official recession.

In terms of how cryptocurrency markets might react, traders would likely interpret weaker growth figures as bullish, given that this is likely to deter the Fed from hiking interest so aggressively at its upcoming meetings and in 2023. Stronger than expected growth figures thus might weigh on crypto sentiment, if the data is interpreted as boosting Fed tightening prospects.

Facebook Stocks Slumps Post-Earnings, Zuckerberg Reiterates Co.’s Metaverse Focus

Meta Platforms, the parent company of Facebook, has seen its share price drop sharply in pre-US market open trade after the US social media giant posted worse than expected earnings figures for Q2 after the close on Tuesday. Meta’s earnings per share (EPS) for Q2 came in at $2.46, below analyst expectations for $2.54. The company’s topline revenue, meanwhile, came in at $28.8 billion for the quarter, just shy of analyst expectations for $28.9 billion.

In the company’s earnings call, CEO Mark Zuckerberg reiterated the company’s focus on its longer-term meta-verse goals, as opposed to maximizing short-term revenue from platform monetization. “Developing these platforms (on the metaverse) could unlock hundreds of billions if not trillions in revenue over time,” Zuckerberg told analysts on the call. In Q1, Zuckerberg had remarked that Meta Platforms is “laying the groundwork for a very successful 2030s”. Meta Platform’s metaverse-focused Facebook Reality Labs division posted a $2.81 billion loss in Q2, slightly less than its $2.96 billion loss in Q1.

Ethereum Implements Tenth Mainnet “Shadow Fork” Successfully as September Merge Approaches

Ethereum developers implemented their tenth so-called “shadow fork” of the blockchain’s mainnet on Tuesday and reported no significant glitches, as traders monitor the blockchain’s progress towards its “Merge” from Proof-of-Work (PoW) to Proof-of-Stake (PoS) in September. A shadow fork is where developers copy data from the mainnet to onto a test environment to run experiments.

Ethereum will use this shadow fork to test releases similar to those that be used in the Goerli merge on 10 August, Ethereum developer Parithosh Jayanthi told CoinDesk. The merge of the Goerli testnet to PoS from PoW will be Ethereum’s last trial run before the merge of its mainnet in September.

Analysts framed the latest shadow fork success as another small step towards a successful mainnet merge. Pre-merge Fear Of Mission Out (FOMO) has been touted as one of the reasons why Ethereum has been an outperforming cryptocurrency in recent weeks. Versus 30 days ago, ETH is around 35% higher, according to CoinMarketCap.

SEC’s Coinbase Investigation Could Have “Chilling” Effect, Says Lawyer

An investigation that the US Securities and Exchange Commission (SEC) has reportedly initiated against US-based crypto exchange Coinbase Global over its suspected listing of unregistered securities could have a “chilling effect” on the cryptocurrency industry, a legal expert told Cointelegraph, even if Coinbase isn’t ultimately found to have listed unregistered securities.

Australian digital assets lawyer Michael Bacina told the crypto news outlet that “given many of the tokens the SEC has called securities in their insider trading prosecution are listed and trading on Coinbase and other exchanges, this investigation could have serious and chilling effect for both those exchanges and the token projects, whether or not an ultimate finding is the tokens are or are not securities.”

Bacina was critical of the action, saying that it “wouldn’t seem aligned with encouraging pro-active industry engagement”. “Coinbase has a history of good faith engagement on regulatory matters and has indicated the SEC has reviewed their token listing criteria,” he added. The crypto exchange could face “substantial fines,” he noted.