The NCI closed Sunday (09/25/22) 4.3% below last week’s closing. The index’s negative performance was influenced by ether (ETH), down 5.9%, while bitcoin (BTC) fell 3.7%. 

Coming out of a week marked by steep price drops despite Ethereum’s successful transition to PoS, crypto investors braced for another FOMC meeting.

BTC and ETH had a volatile Monday, both partially recovering from a large slump that occurred as the previous week drew to a close. Prices remained mostly stable throughout Tuesday, with BTC trading between $19,000 and $19,500 and ETH sticking close to the $1,350 mark. 

On Wednesday, the day the FOMC’s monetary policy decision was announced, BTC began to surge in the morning in anticipation that a third consecutive 75 bp hike would be announced, averting the possibility of an even larger 100 bp hike not seen since May of 1981.

Market expectations were initially confirmed with the announcement of a 75 bp hike that lifted the Fed funds rate to between 3% and 3.25%, causing crypto asset prices to surge. However, enthusiasm quickly waned as market participants began to digest the Fed’s quarterly projections, with special attention given to the Fed dot plot.

The aggregate of Fed governors expectations points to the Fed funds rate reaching 4.4% by the end of 2022 and that it will remain at or above that level throughout 2023. This outlook suggests two large 75 bp hikes are likely to be announced at the two remaining FOMC meetings in 2022 (November and December) and that rates will remain at those elevated levels during an extended period of time. 

Quarterly projections are likely to change as new economic data trickles in, but Wednesday’s projections portrayed a notably worse medium-term outlook for risk assets than what was initially expected in June, when Fed officials predicted that interest rates would close out 2022 at around 3.4% and 2023 at 3.8%. 

The deteriorating projections for the world's largest economy negatively affected crypto and traditional markets alike, with BTC and ETH prices briefly dipping past $18,500 and $1,250, respectively. 

The Fed slump was short lived, with most digital assets initiating a recovery as Wednesday gave way to Thursday. By the end of the day, both ETH and BTC prices had recovered back to their Wednesday morning highs. 

On Friday, prices dipped in the morning and recovered in the afternoon as trading volume slowly waned. During the weekend, BTC struggled to stay above the $19,000 mark while ETH lost steam on its way to close out the week just below $1,300.

 

Other News

 

Nasdaq announces crypto custody service

Nasdaq announced it will be launching a cryptocurrency custody service for institutional investors. The US stock market operator’s new service continues a trend of traditional market entities, like BlackRock, entering the crypto services industry hoping to profit from a future influx of institutional investors. 

 

Cardano implements successful hard fork 

 

Cardano devs successfully implemented the Vasil hard fork, an upgrade that will bring about a suite of improvements to the Cardano blockchain, enriching its smart contract capabilities, increasing the chain’s throughput, and reducing transaction costs, further improving Cardano’s scalability. For further details and on the Vasil hard fork read our research team’s note here.

 

SEC suit argues entire Ethereum network falls under its jurisdiction

 

A Securities and Exchange Commission (SEC) suit against Ian Balina, the founder of a crypto investment research company, for failing to register a cryptocurrency as a security before an initial coin offering suggests the US regulator perceives the entirety of the Ethereum network to be under its jurisdiction. According to the SEC filing, the transactions in question were “validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country…as a result, those transactions took place in the United States.” 

Legal experts who commented on the matter have expressed concerns that this interpretation would effectively make every transaction on the world’s leading Layer 1 subject to SEC regulation. The lack of clarity in regards to the SEC’s role as a regulatory authority in the crypto space has spurred an intense debate in the US and contributed to the regulatory uncertainty surrounding this nascent asset class. The SEC’s wide reaching interpretation of its own jurisdictional boundaries based on the location of PoS validators could add another degree of ambiguity to this debate.

 

Looking ahead

 

This week’s economic calendar will be headlined by Friday's personal consumption expenditures (PCE) reading in the US. Two speeches by chairman Jerome Powell, alongside public comments by other Fed officials throughout the week, will also shed light on the concerning macro outlook currently driving crypto prices.  

 

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