Cryptocurrency prices were edging higher Monday following a sharp slide that came after Federal Reserve Chairman Jerome Powell said that U.S. economy is likely to need higher interest rates, for a longer time, to quell spiraling inflation.
Speaking at the Kansas City Fed’s annual central banking symposium in Jackson Hole, Wyo., Powell said Friday that higher rates would likely lead to weaker near-term growth and softer conditions in the job market, describing it as the “unfortunate costs of reducing inflation.”
The cryptocurrency market has lost more than $2.1 trillion from its record last November of more than $3 trillion.
Critical Psychological Level
Bitcoin, the most popular cryptocurrency, was up 1.1% to $20,270.68, at last check, according to CoinGecko, after slipping below the psychological threshold of $20,000. Bitcoin has dropped 6.2% in the past seven days.
Winston Ma, managing partner of CloudTree Ventures, said the crypto market would focus on bitcoin’s $20,000 level “as the single most important barometer for the overall market sentiment.”
“After multiple months of ‘crypto winter, the $20,000 price level of bitcoin is a critical psychological level for the crypto players,” said Ma, author of “Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse.”
“But as Powell warns of ‘pain’ ahead, the Fed actions are far from reassuring for those hoping for bullish impulses in the near future.”
Ether, the native cryptocurrency of the ethereum blockchain, rose 1.8% to $1,518.04, and has been off 6.2% over the past week. Dogecoin was up nearly 1% to $0.063662 after being down 8.6% in the past week.
Frank Corva, senior digital assets analyst with Finder, said that the last two times that Powell raised rates by 0.75 percentage point, which he called “aggressive hikes,” the market rallied in the face of them.
Not Immune to Fed Policy
“For this reason, many crypto and equity holders felt that even if Powell was hawkish in his commentary at Jackson Hole, Wyo., this past Friday, markets would rally yet again,” he said “And Powell was hawkish in his sub-10-minute speech, yet markets did not rally. Instead, they did quite the opposite.”
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The price of bitcoin dropped about 9% and the price of ether fell about 13% before the day was out, he said.
Corva said the narrative around ether’s price rise in anticipation of the Sept. 13 Merge — when the Ethereum network transitions from a proof of work to a proof of stake blockchain — quickly dissipated over the weekend. Ether’s price sank as low as $1,420.
“The price drops in BTC and ETH that occurred seemingly as a result of Powell’s hawkish comments were further proof that crypto is currently not uncorrelated to traditional markets, nor is it immune to Fed policy,” he added.
Corva said that until the Fed becomes more dovish, “crypto and other risk-on assets will likely continue to suffer – or at the very least stagnate.”
Separately, David Lesperance, managing partner of immigration and tax adviser at Lesperance & Associates, said Teneo, the liquidator for Three Arrows Capital, secured a court decision in Singapore to round up and preserve the defunct hedge fund’s assets.
Establishing Assets
“This decision gives the Teneo the authority to request access to any financial records the fund kept locally,” Lesperance said. “They want to establish what assets we held in Singapore — such as bank accounts, properties, cryptocurrencies, nonfungible tokens and stakes in companies that were linked to Three Arrows and/or its founders.”
A court in the British Virgin Islands in June appointed Teneo to liquidate Three Arrows’ assets.
“Teneo has gained control of at least $40 million of Three Arrows’ assets,” Lesperance said, “a fraction of the $2.8 billion in unsecured claims filed so far.”
Su Zhu, who founded Three Arrows Capital along with Kyle Davies, delivered an affidavit in person in Bangkok on Aug. 19, accusing the liquidators of misleading the High Court of Singapore about the hedge fund’s structure, according to Bloomberg.
Zhu said the liquidators have offered “inaccurate and misleading” representations of the operations, relationships and timelines associated with these entities in their petitions to the Singapore court.
The whereabouts of Zhu and Davies have been unclear since Three Arrows Capital collapsed.
