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The prospect of a less pugnacious Federal Reserve is encouraging bets that the crypto winter is closer to thawing.
Bitcoin rose as much as US2,9 percent on Thursday in Asia after a near-9 percent jump a day earlier, when the Fed raised rates by 75 basis points for a second month but signaled the pace of tightening will, in time, slow down.
The largest token was trading at US$23 090 as of 1:25pm in Singapore. So-called altcoins made bigger gains: Ether rose as much as 4,7 percent and Polkadot 9,3 percent.
Swaps tied to Fed meeting dates indicate markets anticipate a peak in borrowing costs around year-end and rate cuts in 2023 — which would be a friendlier backdrop for digital assets given they rely on the elixir of liquidity.
“The FOMC decision provided optimism that the end of tightening is in sight and that triggered a nice rally for risky assets that helped elevate cryptos,” said Edward Moya, senior market analyst for the Americas at Oanda.
At the same time, similar bouts of post-Fed investor optimism in May and June quickly faded. Plenty of prognosticators remain skeptical the US central bank can ease up materially given inflation is the highest in a generation.
The potential for more blowups among crypto lenders and investors as well as harsher regulatory scrutiny following this year’s rout are among the other risks for virtual coins. Bitcoin has slumped 50 percent in 2022.
With the next Fed meeting not until September, “there may be some room for upside now,” said Mikkel Mørch, executive director at digital asset investment fund ARK36. But “that will be contingent on the strength of the dollar and the wider macro environment,” he said. – Bloomberg
Peter Tanyanyiwa
Online Reporter