Abstract:
Cryptocurrencies rose on Friday as market risk appetite increased as investors digested the impact of the failure of the U.S. cryptocurrency bill and the first interest rate hike by the Federal Reserve in more than three years. Bitcoin, the largest cryptocurrency, rose 5.2% to around $80,443, recovering some of its losses earlier this week.
Ethereum, the second largest cryptocurrency, rose 5.1% to about $2,576. Smaller cryptocurrencies such as XRP, Solana and Monero also rose.
“In the past 24 hours, the total cryptocurrency market capitalization has increased by more than 2.2% to $2.66 trillion, moving closer to the midpoint of the past month’s range,” said Alex Kuptsikevich, chief market analyst at FxPro. “This time, rising stock indexes and increased overall risk appetite have provided support for the market’s positive momentum.”
The rise suggests that digital asset investors have digested much of the bad news of the past week. An important U.S. cryptocurrency regulatory bill, the Clarity Act, failed to pass in a procedural vote on Tuesday. The market had previously believed that the bill was unlikely to pass the Senate; and the Federal Reserve's 25 basis point interest rate hike on Wednesday was also in line with market consensus.
The Bank of Japan raised its benchmark interest rate on Friday, in line with market expectations, but the resolution was divided.
Still, the failure to pass the Clarity Act was a setback. The industry had hoped the legislation would codify U.S. cryptocurrency regulations into law, making it harder for future governments to overturn them. But even without the bill, regulators are continuing to move forward. On Thursday, the U.S. Securities and Exchange Commission cleared the way for tokenized U.S. stocks to trade in the United States.
Bitcoin is still well below its record high set in October last year. However, at present, the "Clarity Act" vote and the Federal Reserve's interest rate decision have been implemented and have not triggered a new round of sharp declines. The market is still looking for catalysts that can get cryptocurrencies out of the overall downturn.
Despite both the Federal Reserve and the Bank of Japan raising interest rates, the total market capitalization of cryptocurrencies is still growing. “This shows that the two decisions have been basically digested by the market before they are implemented,” said Alice Liu, director of research at CoinMarketCap. “The more important question now is how higher financing costs will affect investor positions in the next few weeks.”
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