How The FED Affects Crypto Market: 5 Cryptos To Watch

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Last Updated December 22nd 2022
5 Min Read

The extradition from SBF essentially means cryptos will be guided under the Fed. In the event of this new action, we have 5 cryptos to watch out for. 

  • Bitcoin (BTC): The hawkish policy of the central bank potentially threatens Bitcoin 
  • Ethereum (ETH): ETH will also likely incur significant risks due to Fed’s tightening. 
  • BNB (BNB): This one is still yet to live up to its supposed strong billing. 
  • Toncoin (TON): The TON crypto may rise, but nonetheless, investors should be careful. 
  • XDC Network (XDC): This one is fundamentally intriguing, but vigilance is critical here. 

 

A Closer Look At How The FED Affects Crypto Market And The 5 Cryptos To Watch 

Just recently, the legal drama surrounding Sam Bankman-Fried (aka SBF), the FTX founder, undoubtedly took over these top cryptos. But, with the ex-crypto celebrity agreeing to the U.S. extradition as per the CNN report, the issue now focuses on another person or entity - Jerome Hayden Powell, the Federal Reserve Chair. 

While this SBF fiasco represents a type of one-off headwind, this cloud over cryptos courtesy of JHP remains an existing concern. Moreover, digital assets face an uncertain future with the central bank’s move attacking the high inflation by raising the benchmark interest rate. 

In all honesty, it’s still too early to pronounce the crypto sector dead on arrival. But, cryptos represent risk-on assets. Hence, it’ll likely require the support of central bank policies. Unfortunately, this support may take a long time. Hence, it’s vital to approach the ecosystem with great vigilance and care. So, here are 5 cryptos to watch out for.

 

Bitcoin (BTC)

Bitcoin shares a type of inverse statistical relationship with the dollar index. But this is rarely a surprise. So, if the dollar increases in strength, then cryptos may lose their relative value. But, if the dollar value declines in strength, virtual currencies will likely rise. 

For a while, the latter has stayed true. However, as the chief investment officer of Verdence Capital Management, Megan Horneman, explained, there’s still much liquidity to be drained. Furthermore, Horneman adds that this means that Fed coming and cutting rates with any economic weakness is likely behind us. 

Unfortunately, draining this liquidity translates to a type of deflationary action, i.e., removing the surplus dollars from the monetary system. But again, if this materializes, the dollar can increase relative value, thus questioning Bitcoin’s (and other crypto’s) valuation. So, the sideline seems to be a safer option right now. 

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Ethereum (ETH)

In early 2021, massive attention within the digital asset space focused on ETH (Ethereum) and the “merge” event. Initially, the network featured PoW, a consensus mechanism. But, as crypto’s popularity exploded, PoW-integrated blockchains took way too much energy. Hence, several developers shifted to the exponentially efficient protocol, i.e., PoS. 

For a while, analysts wondered about the feasibility of such a move, considering its unprecedented state. With the event behind us, the crypto faces similar trials as other cryptos, i.e., Fed policymakers urging to cut inflation at all costs. 

Moreover, who would voice criticism from the general populace if digital assets were to become victims of such deflationary policies? Blockchain proponents will express concern, but with the FTX drama posing a black eye towards crypto, gaining sympathy will be a rare sight. Hence, it’s best to keep a watch. 

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

BNB (BNB)

For lay crypto observers, Ethereum and Bitcoin have primarily become household names. But digital assets such as BNB, despite garnering huge market capitalization, still deliver blank stares within the blockchain uninitiated. But, the FTX bankruptcy shifted this narrative dramatically. As virtual currencies undergird the BNB exchange, they theoretically should perform pretty well. 

After all, Binance once stood composed to bail FTX until it eventually decided to bail out from the embattled platform. From a logical deduction, an onlooker may assume that BNB enjoys an excellent financial profile. Thus, in turn, its underlying crypto must be resilient from the other cryptos, especially the speculative types. 

That said, BNB can’t escape market volatility. Following the trailing week, the BNB coin slipped over 7% of the market value. At the same time, Ethereum and Bitcoin also filed by 5 and 2%. For now, cryptos must overcome the credibility crisis. So, BNB should be kept under the lens. 

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Toncoin (TON)

Toncoin represents a type of blockchain architecture initially designed to send, store, and buy funds. Hence, it utilizes a PoW mechanism to facilitate reliability and scalability. 

Furthermore, Toncoin’s mission revolves around developing a full-fledged ecosystem with decentralized services, storage, DNS, and more. Although this is intriguing, market performance matters the most right now. Here, the crypto differentiates itself from most cryptos by gaining more than 9% market value during its trailing week. 

From a technical aspect, it’s possible the crypto may be in the midst of creating a long-term rounding bottom pattern. However, there are still exceptional risks. Hence, investors shouldn’t gamble on everything. 

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

XDC Network (XDC)

XDC network currently owns the title of having top performance over the last few days. Thus, gaining over 24% market value and putting it above Toncoin. Whether this status can be continued in the coming weeks is another story. 

Unlike TON, it’s undoubtedly challenging to observe a visible technical pattern in XDC. During the trailing year, the coin fell by about 60% in market value. Plus, despite the recent positive momentum in recent months, the coin is only a few meters above parity. This doesn’t precisely deliver confidence, particularly with the Fed and its commitment to attacking inflation. 

XDC is undoubtedly a good network with an interesting concept. But, with the recent issue of the Fed here and there, it would be best to exercise some vigilance over the coin. Particularly with the Fed possibly imposing significant deflationary pressures against cryptos.

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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

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