FX.co ★ Crypto market surges following Fed decision

At the June meeting, the US Federal Reserve raised its benchmark interest rates by 75 basis points at once to 1.50-1.75%. It was the biggest increase since 1994.

During the press conference following the US Federal Reserve meeting, Jerome Powell said that the central bank could raise interest rates by a similar magnitude at the next policy meeting.

In addition, the US regulator has revised down its economic forecasts. The Fed members expect gross domestic product in the United States to rise by 1.7% at the end of this year, compared to the previously forecast of 2.8%.

On this news, the cryptocurrency market began a strong rally. As a result, BTC has soared by 2.7% in the last 24 hours. Digital gold is trading at $21,039. According to CoinMarketCap, in the past 24 hours the lowest price reached $20,780 and the highest was $22,868.

By the way, the major virtual asset has seen a spectacular permanent decline until today, which was the highest since December 2020. Bitcoin's active decline began on June 7, when it was trading at $31,500. Since then, the cryptocurrency has plummeted by 33%.

During May, the price of digital gold fell by 15.59%. Over the past two months, the value of BTC has plummeted 1.6 times to $29,000 from $45,800. At the same time, the price of Bitcoin slumped by 27% over the past spring.

The cryptocurrency has already lost around 70% in value since November last year, when it broke an all-time high, soaring above $69,000.

Altcoin market

Ethereum, Bitcoin's main competitor, also began Thursday's trading session with an increase. It rose by 4.7% over the past 24 hours, reaching $1,170.

As for top 10 cryptocurrencies by capitalisation, all coins except for USD Coin posted significant gains over the past 24 hours. The highest result was recorded for Solana (+18.15%).

In contrast, almost all virtual assets in the top 10 lost value permanently during the past week. The main outsider was Ethereum (-32.68%).

According to CoinGecko, Elrond Coin (+22.2%) topped the list of top 100 most capitalised digital assets in the last 24 hours, while DeFiChain (-6.3%) was at the top of the decline list.

In the past week, Chain (-48.2%) was the main outsider among the top 100 cryptocurrencies, while Tenset (+835.3%) was the main favourite.

Market pressure factors

Analysts point to a decline in investors' appetite for risky assets amid the latest inflation data in the United States as the key reason for the prolonged fall in the virtual asset market in early June.

According to the US Federal Bureau of Labour Statistics, annual inflation in the country soared to 8.6% in May, the worst rate in the past 40 years, since the winter of 1981. By the way, market analysts had earlier predicted the annual inflation rate to remain at April's level of 8.3%.

An additional downward factor for the virtual asset market has been the persistent fall in key US stock indices, in particular the NASDAQ Composite.

Earlier, experts at investment firm Arcane Research stated that the correlation between the BTC and technology securities had reached its highest level since July 2020.

Such a close association between digital gold and the NASDAQ index has investors increasingly questioning the cryptocurrency's ability to be a hedge against inflation and worrying that BTC may soon become a traditionally risky asset instead of an alternative asset.

Analyst forecasts

Despite the current growth of the first cryptocurrency and the digital asset market as a whole, experts are as pessimistic as possible about their future. For example, most analysts believe that the cryptocurrency market is in active decline. Many experts compare today's events with the dramatic fall of cryptocurrencies in the past. Then, in a similar market condition, BTC lost about 80% of its value, while alternative cryptocurrencies dropped by about 90%.

Moreover, many virtual asset analysts now suggest that it will not only be June, but the entire summer of 2022 that will be unfavourable for Bitcoin, and that digital gold may even hit a cyclical bottom in August.

Experts consider the ongoing military conflict in Ukraine and market participants' concerns about the outlook for the global economy to be the key downward factors for the FX market in June-August.

Recently, Ripple CEO Brad Garlinghouse said that the market for digital assets will shrink to dozens of cryptocurrencies in the near future.

According to Garlinghouse, the recent high-profile collapse of the Terra USD (UST) stablecoin and the digital token Luna, which saw the cryptocurrency market lose billions of dollars within weeks, is proof of the serious vulnerability of virtual assets.

Scott Minerd, chief investment officer at international consultancy Guggenheim Partners, has previously stated that most cryptocurrencies were junk and would disappear in the future, with only Bitcoin and Ethereum able to survive the crypto winter.