Crypto markets correct sharply on Fed’s rate cut stance 📉

Hola folks!

Welcome onboard our weekly crypto ride. The past week saw all major cryptos correcting as the markets reacted to the US Fed’s stance of just one rate cut for the year. BTC is trading around the $65k price range even as ETH is down trading below the $3.5k level.

Read on to know what caused the market to correct and if this correction presents a good accumulation opportunity for crypto investors.

After a strong start to the week, with consistent inflows into the spot BTC ETFs for 19 consecutive days, crypto markets corrected sharply as the macroeconomic challenges took center stage with interest rate cuts no longer being a positive trigger in the near term.

The US Federal Reserve has confirmed that it only expects to cut rates by 25 bps once in the next six months. This is on the back of a heated economy, running close to full employment along with "sticky" inflationary pressures. 

All "risk-on" assets reacted sharply to this development, with crypto assets plunging across the board. Market leaders BTC and ETH were still relatively insulated from the sharp price fall, ending the week slightly in the red, trading below $66k and $3.5k levels, respectively. The overall crypto market cap was impacted much more negatively, losing $200bn over the week, and is now hovering below the $2.5trn level, with most tokens trading in the red for the week. The limited fall in BTC and ETH prices, and their increasing market cap dominance is a clear sign that risk capital is rotating back from altcoins into the "blue-chip" tokens, in a flight towards safety. 

More so, the price of ETH fell less than that of BTC as SEC Chair Gary Gensler stated that Ether ETFs should be fully approved by September 2024. Once the registration statements are approved, the new ETFs can be listed, allowing investors to easily trade funds that hold actual Ether. Despite this significant development, the crypto market remained in a slump. While Ether experienced a brief price surge following the news, it quickly reversed, and the broader market continued to face downward pressure.

For BTC, the big positive for the week (which also probably halted its fall in prices) was that MicroStrategy, the Nasdaq-listed business intelligence firm and prominent Bitcoin holder, announced plans to offer $500m (later extended to $700m) in convertible senior notes due 2032. The proceeds will be used to acquire additional Bitcoin and for other corporate purposes. MicroStrategy currently holds 214,400 BTC worth over $14 billion, making it the largest public Bitcoin holder.

The broader crypto markets were a sea of red as most altcoin tokens corrected by double-digit percentage during the week. Particularly hard hit were two broad segments: Memecoins and AI-related crypto tokens. Memecoins have enjoyed a strong run so far this year, but due to their higher volatility, during periods of drawdowns they are most impacted, with FLOKI falling 30% and WIF and BONK also correcting 20%.

For AI-related tokens, tech giant Apple's highly-anticipated annual developers event failed to inspire traders. Major giants like RNDR, FET, TAO, and AGIX declined sharply during the week. Even Layer-1 networks like NEAR and ICP, which have a strong AI-focused roadmap, corrected sharply. 

Meanwhile, Curve's CRV token plummeted 30% in a day, after loans tied to its founder, Michael Egorov, faced liquidation risk. Egorov had taken out a cumulative loan of nearly $100 million in stablecoins against $140 million in CRV collateral. The liquidation of these loans put pressure on other DeFi protocols, causing CRV prices to fall.

The only prominent outlier, amidst the blood bath was Telegram's TON token, which continues to conquer new all-time highs, as the TON blockchain gains more traction and users. Gaming and memecoins from the TON ecosystem are driving heightened activity.

• BTC  $65,384 ⏬ 2.60%

• ETH $3,418 ⏬  3.29%

• TON $7.29 ⏫ 6.06%

(All data here is as of 3.46 p.m., 18 June 2024)

Before we conclude, here’s a quick look at some important news from around the crypto world.

• The final approvals for exchange-traded funds (ETFs) trading Ethereum’s ether (ETH) should be finished this summer, US SEC Chair Gary Gensler on June 13. Read more here. 

• The Australian Securities Exchange (ASX), which accounts for 90% of Australia’s equity market, has approved its first spot-bitcoin exchange-traded fund, according to a blog from the issuer VanEck. Read more here. 

That’s it for now. Thanks for sticking around.

See you later, folks! 👋

Loving the newsletter? Make sure to spread the love and hit share!