The Federal Reserve of the United States took the obvious path of least resistance, raising interest rates by 25 basis points to quell investor hopes that it would become more dovish in the aftermath of a banking crisis that has shaken investor confidence in traditional financial services firms and the strength of the US dollar.
Bitcoin paused in the immediate aftermath of the bank’s decision before progressively declining, even falling below $27,000. The most valuable cryptocurrency in terms of market value was currently trading at $27,375, down 3.5%. Earlier in the day, as markets looked for an end to the Fed’s year-long rate hike cycle, Bitcoin soared above $28,700.
“Risk aversion was able to push down Bitcoin as market jitters returned on banking concerns and concerns about a rapidly failing economy,” stated Edward Moya, senior market analyst at foreign exchange market maker Oanda, in an email. “Although the Fed may have stopped tightening, the risk of something else breaking in the banking industry remains high.”
Ether has similarly fallen from highs of over $1,800 to its current price of $1,737. The market value of the second largest cryptocurrency fell by more than 3.3%. With the exception of APT, the token of layer 1 blockchain Aptos, and LTC, the native crypto of open-source blockchain Litecoin, nearly every other major crypto by market size in the CoinDesk top 25 was in the red. They both increased by more than 5% and 6%, respectively. The CoinDesk Market Index, which measures the overall performance of the cryptocurrency market, was recently down 2.7%.
Meanwhile, in the crypto world, the Securities and Exchange Commission (SEC) warned cryptocurrency exchange Coinbase that it was pursuing enforcement action for securities violations and filed a lawsuit against Tron founder Justin Sun on allegations of selling and airdropping unregistered securities, fraud, and market manipulation. Tron recently fell 10%.
According to Oanda’s Moya, Sun’s charges are “newsworthy.” “Market manipulation is one aspect of the cryptocurrency ecosystem that has yet to be cleaned up or even come close to being fully handled,” he wrote.