Market deep dive: The crypto market remains rocky

We saw another week deep in the red for the crypto market.

BTC$ is trading -7.5% lower at 36.5k and ETH$ is trading -5.9% lower at 2.75k. But let us start at the beginning.

The week began with macro figures that turned out to be on the negative side. On Monday, the ISM Manufacturing PMI for April in the US was 2.2 points behind expectations at 55.4, but still in the growth zone.

Similarly, the ISM Service April PMI print on Wednesday came in at 57.1 vs. the expected 58.5, and ADP Employment Change for April was +247k vs. a consensus at around +400k.

The biggest event of the week was, of course, the two-day FOMC meeting, which ended with a press conference on Wednesday. The FED delivered on market expectations with a 50bps rate hike and an announced reduction of their securities holding of 47.5bn$ a month starting in June, with a maximum monthly reduction of 95bn$ after three months. This represents about double the amount compared to their last attempt to reduce the balance sheet between 2017 and 2019.

There was a surprise at the Q&A, where Powell stated that the FED is not considering an (already priced in) 75bps hike for the June meeting. He also sounded confident that inflation will soon flatten out, and that he believes inflation can be brought under control without causing a jump in unemployment.

The market rallied in reaction to Powell’s comments: Nasdaq closed 3.2% higher and Bitcoin jumped almost 4%.

The market apparently believed Powell’s words as the priced in rate hike for the June meeting was now only 25bps. At least until the next day…

That is when markets turned 180 degrees. After the US opening, and without any obvious trigger or market news, stock and crypto markets started crashing, and rates rallied.

The day ended with the Nasdaq losing -4.99%, the Dow Jones -3.12%, and BTC$ over -9%. US 10-year rates spiked to 3.1%, and the market is now again pricing in a 75bps rate hike for the June meeting.

It is rare to see such a swift change in market expectations, and it is puzzling what exactly triggered it. The awaited clarity from the FED guidance is gone for the moment and it will be interesting to see how they react to the recent price action.

Turning now to more crypto specific topics…

One of the best performing coins this week was Tron (TRX), up 24% over the past seven days. TRX launched their algorithmic stablecoin USDD this week and has seen significant inflows. The market cap at the time of writing is already 127m$. This is still small, of course, compared to its biggest competitors: Luna with UST (18.7bn$), DAI (8.1bn$), and Waves USDN (0.9bn$). However, USDD’s early growth rate, is impressive.

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