Cryptocurrency prices were off as traders reacted to the Federal Reserve's fourth consecutive rate hike.
Bitcoin was flat at $20,281.88 on Nov. 3, according to data firm CoinGecko. Ether, the native currency of the ethereum blockchain, was off slightly to $1,544.79, while dogecoin slipped 0.2% to $0.130632.
Stocks also moved lower Thursday, extending declines from last night's post Fed-decision.
"The Fed hiked rates by 75 bps yesterday, as many had predicted and as the market seemed to have priced in," said Frank Corva, senior analyst for digital assets at Finder. "Both traditional and digital assets markets rallied upon the announcement."
However, Corva said, what the markets didn’t like was Federal Reserve Chair Jerome Powell’s forward guidance.
"Powell said that if the Fed overtightens it could use its tools to support the economy later on," he said. "He continued to explain how he feels overtightening is a better risk than not tightening enough, which could lead to inflation becoming entrenched."
Corva said Powell also stated that the terminal Fed Funds rate will be higher than previously expected "and that the Fed expects to stay the course until the job of bringing inflation down is done."
"Upon receiving this message, just about all markets – from bonds to equities to crypto – started to fall," he said. "In essence, Powell has made it clear that he plans to tighten until either inflation comes down or something breaks."
"This isn’t good news for markets, particularly markets for risk-on assets like tech stocks and crypto," Corva added. "Powell is on a mission to bring down inflation and the well-being of financial markets seems to at best be a secondary concern of his right now."
Edward Moya, senior market analyst for the Americas with Oanda, said that a hawkish Fed is triggering a de-risking moment on Wall Street, yet Bitcoin refuses to give up the psychological $20,000 level that is important to crypto traders, or "hodlers," as they are also known.
"Stocks are down significantly post-Fed yet Bitcoin continues to hover above $20,000," Moya said. "Bitcoin might eventually break here, but this resilience that is being displayed should show markets how confident long-term hodlers remain."
Moya said stocks aren't going to have a painful death here, "but they will soften until markets price in a little more Fed hawkishness. "
Meanwhile, Winston Ma, managing partner of CloudTree Ventures, said that the crypto trading in Asia received a boost from the Hong Kong government’s proposed rule to potentially allow retail investors to trade in cryptocurrencies and crypto exchange-traded funds.
Financial Secretary Paul Chan said in a keynote address broadcast to the Hong Kong Fintech Week conference on Monday that authorities will start a consultation process which aims to retail investors "a suitable degree of access" to virtual assets, Ma said.
"The city, which previously proposed limiting crypto trade to professional investors, has seen planned rules for digital assets heavily criticized for stifling innovation," said Ma, author of "Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse." "The HK government probably hopes that the new move toward legalizing retail Investors’ crypto trading will help it rebuild its fintech hub status."
He said that the latest announcement could put Hong Kong's rules on a par with those of Singapore.
"It will be interesting to see how the future competition between HK and government to play out, for crypto talents and investment capital," Ma said.
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