After the publication of the minutes of the last Fed meeting in 2021, bitcoin fell by almost 10%, but the leading altcoin dropped more, by almost 13.5%.
In the published minutes, in particular, it is noted that the Federal Open Market Committee (FOMC) insisted on raising short-term rates “sooner or at a faster pace than participants had earlier anticipated.” According to the Chicago CME futures exchange, futures prices indicate a possible rate rise as early as March.
Even after the crash, ETH stays still more profitable than BTC. Over the year, Ethereum grew by 175%, and the profit from investing in bitcoin over the same period is 10 times less. Analysts believe that traders have decided to slightly reduce the dynamics of ETH.
A similar story happened with Solana (SOL), Ethereum’s main competitor. On news from the Fed, the SOL cryptocurrency dropped by almost 17%. Meanwhile, over the year its growth amounted to more than 7500%. If it is true that traders are influencing the market, then further Solana (SOL) correction can be expected.
Experts also pay attention to the ETH / BTC ratio. After the market crash, it reached the critical support level of 0.078. It was from this level that ETH bounced during the previous market drop in late December. It is possible that now Ethereum will stop falling and start growing from this level.
The decline in the market share of Etherеum below 20% also speaks in favor of the positive sentiment. Meanwhile, Bitcoin Dominance returned above 40% again. According to experts, this may mean that the funds hold bitcoin and are not yet withdrawing funds in favor of Ethereum or other altcoins. However, ETH trading volumes exceed BTC volumes. This indicates a higher potential for Ethereum in the long term.
As for the short-term, it is highly likely that the positive dynamics will return after the nervous reaction of the market cools down. Madison Faller, the global strategist at JPMorgan Private Bank, told Bloomberg that the proposed three rates rising in 2022 will not push inflation back to the 2% target. The expert notes:
– Growth and inflation will be decelerating throughout 2022, but nonetheless remain above historic trend levels … This will call for a much lower risk of a Fed-induced material market correction.
Thus, the trend will continue towards investing in cryptocurrencies to protect funds against inflation. On the other hand, strategists at Fundstrat Global Advisors said it is time for investors to switch to the smart contracts sector if they want to get the most from the crypto market recovery. They note:
– Given the current macro backdrop, leverage within the bitcoin market, and recent robustness seen in the altcoin market, we think it’s appropriate to be overweight Ethereum and other smart contract platforms.