The U.S. Federal Reserve kept interest rates unchanged as expected at its September meeting on Wednesday. Bitcoin briefly fell below US$26,900 in the early hours of the morning after Fed Chair Jerome Powell said more interest rate hikes may be needed to curb inflation. But the token is now trading above the US$27,000 support level. Ether also dropped but held above US$1,600. Most other top 10 non-stablecoin cryptocurrencies logged losses in the past 24 hours. Toncoin led the losers with a slide of over 6%. U.S. stock futures traded lower Thursday morning after a day of Wall Street losses Wednesday.

Cryptos down amid rate hike worries

Bitcoin dipped 0.28% in the last 24 hours to US$27,137.70 as of 07:30 a.m. in Hong Kong. But the world’s largest crypto token still posted a weekly gain of 3.52%, according to CoinMarketCap data. 

The Fed announced a much-anticipated pause in its rate hiking cycle Wednesday. The rate will continue at 5.25% and 5.50%, its highest level in 22 years. The Fed raised its projected interest rates for the end of 2023 to 5.6%, indicating another rate hike to come within the year. The agency also raised its projection for the end of 2024 to 5.1%, up from the 4.3% predicted in June.

“With 99% of forecasts predicting no change at the FOMC meeting, it was clear that we would see a stabilization of interest rate policy moving forward. However, it came as a surprise that the report emphasized slower rate cuts moving forward than previously projected,” Michael Silberberg, Head of Investor Relations at the U.S.-based crypto hedge fund AltTab Capital, said in an emailed comment.

“While it’s a relief that the Fed see us at the peak of rate hikes with their forecast of fewer rate cuts in 2024, it is hard for us to take today’s announcement with too much optimism,” added Silberberg.

Following Powell’s announcement, Bitcoin fell more than 1.5% to US$26,864.08 on early Thursday morning in Asia. But it soon recovered to above US$27,000.

On the regulatory front, the U.S. Securities and Exchange Commission (SEC) said it would expand its regulatory scrutiny over the crypto industry. The agency has already sued multiple crypto companies for alleged securities violations. Those companies include software firm Ripple Labs and the U.S. branches of the world’s largest cryptocurrency exchanges Coinbase Global Inc. and Binance Holdings Ltd. 

“We’re going to continue to bring those charges,” SEC head of crypto David Hirsch said Tuesday at a forum in Chicago, indicating that the regulator would look into the actions of intermediaries such as brokers, dealers and clearing agencies.

Despite ongoing regulatory and rate hike concerns, Markus Thielen, head of research and strategy at digital asset service platform Matrixport, said he sees some “breakout signals” for Bitcoin. That includes the token’s move above its 50-day average of US$27,103. The 50-day average is a trend model that signals when Bitcoin is experiencing a bullish trend (above) or a bearish trend (below).

Ether dropped 1.26% to US$1,622.84 but was still trading 0.97% higher for the week. Most other top 10 non-stablecoin cryptocurrencies logged losses in the past 24 hours. The exceptions were XRP and Solana’s SOL, which rose 1.52% and 1.33% respectively. 

Toncoin, the native token of The Open Network (TON), led the losers. The coin dropped 6.54% to US$2.41, while holding a weekly gain of 27.20%. The token has surged almost 75% in the past 30 days.

TON is a blockchain-based network originally developed by messaging giant Telegram. The Toncoin token received a boost last week from the launch of TON Space — a self-custodial digital wallet available to Telegram’s estimated 800 million users.

The total crypto market capitalization dipped 0.47% in the past 24 hours to US$1.07 trillion, while trading volume inched up 2.75% to US$28.05 billion.

Wall Street down after Fed meeting

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U.S. Federal Reserve Chair Jerome Powell|Image: Getty Images

U.S. stock futures traded lower Thursday morning in Asia, with all three major U.S. indexes logging losses as of 09:50 a.m. in Hong Kong. Wall Street closed lower on Wednesday, the Nasdaq Composite leading the losers with a 1.53% slide.

Most of the major Asian stock indexes were also down Thursday morning. Hong Kong’s Hang Seng, Japan’s Nikkei 225 and South Korea’s Kospi all booked losses, while China’s Shanghai Composite posted a marginal gain. Kospi led the losers with a 1.22% drop.

Although the Federal Reserve decided to keep interest rates unchanged in September, the U.S. central bank struck a hawkish tone

“The process of getting inflation sustainably down to 2 percent has a long way to go,” said Fed chair Jerome Powell at a Wednesday news briefing. 

“We are prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we are confident that inflation is moving down sustainably toward our objective,” he added.

Looking ahead, 12 out of the 19 Federal Open Market Committee participants favored another 25-basis-point rate hike by the end of 2023. Fed members also projected slower-than-expected rate cuts to come, with the median projection for the appropriate Federal funds rate in 2024 rising from 4.6% in June to 5.1%.

“The new projections suggest that the Fed has a fairly strong degree of confidence in its outlook for a soft landing and, in turn, that there will be very minimal space for policy easing next year,” Seema Shah, chief global strategist at the U.S.-based asset manager Principal Asset Management, told Bloomberg on Thursday.

Meanwhile, Gennadiy Goldberg, head of U.S. interest rate strategy at investment bank TD Securities in New York, questioned whether the Fed’s tight monetary policy can ride out changes in the economy.

“The Fed is trying to send as hawkish a signal as it possibly can. It’s just a question of whether the markets will listen to them without taking them with a grain of salt,” Goldberg told Reuters on Thursday.

“They’re talking about higher rates for longer, but it’s really the economy that matters. And if the economy starts to soften, I don’t think these dot plot projections will actually hold up,” said Goldberg.

The Fed will meet on Nov. 1 to make its next decision on interest rates. The CME FedWatch Tool predicts a 71.6% chance of no interest rate hike in November, up from 70.1% on Tuesday. It also gives a 53.4% chance of another pause in December, down from 59.2% on Tuesday.

Investors are now waiting for the U.S. initial jobless claims data on Thursday and the S&P Global’s flash purchasing managers’ index (PMI) report on Friday as further insight into U.S. inflation.

(Updates with equity section.)