Cryptos Gain On No Negative Surprises From Fed

Cryptocurrencies joined stock markets worldwide in a relief rally as the Federal Reserve acted on expected lines and hinted at less than expected hawkishness, going forward. Crypto market capitalization increased to $1.8 trillion, or almost 2 percent overnight.

The U.S. Federal Reserve on Wednesday hiked interest rates by 50 basis points. It also announced that the Fed’s Balance Sheet reduction would start in a phased manner from June 1.

Top ranked Bitcoin is trading at $39,338.25, gaining 1 percent overnight. At the current market capitalization of $749 billion, BTC dominates 41.9 percent of the overall crypto market.

Rival contender Ether has gained 2 percent to trade at $2,918.42. Weekly gains are close to half percent. Ether’s market capitalization has increased to $352 billion, while market dominance has touched 19.7 percent.

4th ranked BNB (BNB) gained 3.8 percent, whereas 6th ranked Solana (SOL) rallied 4.1 percent. 7th ranked XRP (XRP) has also gained 2 percent.

8th ranked Terra (LUNA) is however trailing Wednesday’s levels.

9th ranked Cardano (ADA) added 3.8 percent whereas 11th ranked Dogecoin (DOGE) gained 3.2 percent.

20th ranked TRON (TRX) has gained 7.7 percent on a daily basis and 32.1 percent on a weekly basis amidst the launch of the USDD stablecoin.

32nd ranked Ethereum Classic (ETC) surged more than 11 percent. 48th ranked Axie Infinity (AXS) has also added 10 percent overnight. 73rd ranked Zilliqa (ZIL), 75th ranked Loopring (LRC) and 94th ranked Anchor Protocol (ANC) also recorded double digit gains.

According to the schedule announced by the Federal Reserve, during the period from June to August of 2022, the holdings of Treasury securities would be reduced, subject to a monthly cap of $30 billion and Agency debt and mortgage securities subject to a monthly cap of $17.5 billion. From September 2022 onwards, the monthly caps would be raised to $60 billion and $35 billion respectively, which is in line with the indication in the minutes of the FOMC held in March, 2022.

The Balance Sheet reduction is primarily being undertaken to shrink the Fed’s massive holding of assets, caused by the asset purchases it did to bolster the economy, in the wake of the Covid-19 pandemic. The Fed feels that it is time to unwind the assets as the job market is close to full employment and the inflation is at a multi-decade high.

The anxiety surrounding the Fed’s Balance Sheet reduction primarily revolves around the impact it would have on the valuation of assets, particularly risk assets. Between January 2020 and March 2022, the Fed’s Balance Sheet had increased from $4.2 trillion to $8.9 trillion. During the same period, crypto market capitalization had increased from $250 billion to $2.1 trillion.

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