Cryptos Decline As Tether De-peg Adds To Fed, SEC Pain

Cryptocurrencies declined more than 4 percent in the past 24 hours as a mild de-peg in Tether (USDT), the largest stablecoin exacerbated the negative sentiment triggered by the Fed’s hawkish stance and the recent regulatory actions of the SEC.

Tether (USDT) which commands a market capitalization of more than $83 billion, traded between $1.0007 and $0.9958 in the past 24 hours as investors apparently dumped the stablecoin in favor of other stablecoins viz USD Coin (USDC) and Dai (DAI). The selling resulted in a disproportionate accumulation of USDT in the Curve 3Pool, a stablecoin pool for decentralized finance holding a massive amount of liquidity in the three top stablecoins: USDT, USD Coin and Dai.

According to Cryptos Headlines, the de-peg was triggered in response to the decision made by AAVE, a decentralized finance or DeFi lending and borrowing protocol to halt the usage of Curve (CRV) as collateral for loans on their platform. In response, Tether has assured markets that they were ready to redeem any amount of Tether.

Earlier, the Federal Reserve had as widely expected skipped a rate hike in its meeting that concluded on Wednesday but signaled further rate hikes. Borrowing costs are seen rising by 50 basis points by the end of the year.

In the Summary of Economic Projections issued on Wednesday, the Fed has pegged the inflation forecast for 2023 at 3.2 percent, versus the 3.3 percent projected in March and 3.1 percent projected in December. Inflation is seen reducing to 2.5 percent by 2024 and 2.1 percent by 2025.

The forecast of growth or the change in real GDP in 2023 has been increased to 1 percent from 0.4 percent projected in March and 0.5 percent projected in December. The unemployment rate has been forecast to fall to 4.1 percent, from 4.5 percent projected in March and 4.6 percent projected in December.

The median year-end projection for the federal funds rate has been retained at 5.1 percent. The same is projected to decrease to 4.3 percent by 2024, to 3.1 percent by 2025 and to 2.5 percent in the longer run.

The actions by the Fed lifted the Dollar Index, a measure of the Dollar’s strength against a basket of 6 currencies to 103.05, versus 102.95 a day earlier.

Meanwhile the European Central Bank, as widely expected, raised rates by another 25 basis points. It also hinted at more rates to come to combat the high inflation.
Overall crypto market capitalization has plunged to $1.02 trillion, versus $1.06 trillion a day earlier.

Rising risk aversion also lifted the share of stablecoins in the overall market to 12.5 percent from 12.1 percent a day earlier.

Bitcoin touched a 24-hour low of $24,797.17 dipping to levels last seen in mid-March. It is currently trading at $24,890.34, down 4.2 percent overnight and 6 percent over the past week. Year-to-date gains have fallen to a little less than 50 percent.

Ether too dropped to $1,624.14 and is currently changing hands at $1,633.81 suffering an overnight decline of 6.3 percent and weekly erosion of 11.6 percent. Year-to-date gains have fallen to a little over 36 percent.

Only 2 cryptocurrencies among the top 100 have rallied on an overnight basis. 88th ranked Trust Wallet (TWT) added 6.6 percent whereas 57th ranked KuCoin Token (KCS) gained more than 4 percent.

55th ranked Render Token (RNDR), 75th ranked Injective (INJ) and 48th ranked Aave (AAVE) topped the laggards list, declining more than 11 percent overnight.

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