Synopsis
- The rise of the interest rates by the US Federal Reserve has taken the rates to 5.25%, the highest in 16 years. Throughout the past four consecutive rate hikes, the crypto market has dropped significantly. On the contrary, the cryptocurrency market held its ground this time.
- Cryptocurrency exchanges are expanding their geographical territory to hedge against the adverse regulatory risk in the US. Coinbase and Gemini are doing so by introducing their respective derivatives exchanges offshore.
- The gas fee on the Ethereum network has reached the highest level since May 2022. The rise in transaction costs is primarily attributed to increased on-chain activity around memecoin trading.
- It was a volatile week for the crypto market. However, on a week-on-week basis, the total market cap dropped by a mere 1.75% or $20 Billion.
Key observations
Following the interest rate hike announced by the Federal Reserve on Wednesday, the market moved higher over the next couple of days. However, the weekend saw the gains getting wiped off.
Analysis
Continuous rate hikes to tackle inflation hampers the stability of the bond market. How?
- The yield on the 10-year US Government Treasury Bond is 3.44%. In comparison, the yield for the 2-year bond is 3.78%. Ideally, the yield should have been higher for the longer-term bond.
Now, it doesn’t just remain confined to the bond market and spills over to the economy.
- The inversion of the yield curve poses problems for borrowers such as banks and other players looking to raise money through bonds.
- It causes a slowdown in economic growth.
- To tackle this, the FED has no option but to resort to rate cuts subsequently.
The median average transaction fee on Ethereum has risen to its highest level since May 2022 following increased on-chain activity.
- Decentralized exchanges on Ethereum have attracted the highest level of users since 2021 due to the demand for memecoin trading.
- Daily new unique addresses of EVM-compatible blockchains reached 6.77 million on April 25. The previous record was over two years ago when it reached 6.74 million.
It has been a roller coaster week for the crypto market. Interestingly, the market dominance of different cryptos only changed slightly. With a marginal decrease in the dominance of BTC, there was a marginal increase in the market dominance of the altcoins.
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Deep dive into the top gainer and loser
We closely analyze the performance of top 50 coins by market capitalization, and take a closer look at the best and the worst performers of the week.
Bitcoin Cash (BCH) up by 3.72% ⬆️
Bitcoin Cash’s rise followed BTC’s drop below the $28,000 mark. BCH’s rally only came in the last 24 hours when it moved 8% higher.
Opinion: The trading volumes on BCH are constantly low. Moreover, the price action faces a local resistance level close to the current price. Hence, BCH is not likely to sustain the move. This is likely driven by a few large players taking advantage of the low volumes.
Arbitrum (ARB) down by 16.52% ⬇️
Arbitrum has largely followed the sentiment of the overall crypto market. The dip in the price action of $ARB is merely a price correction that was anticipated as the airdrop farmers have now drifted away.
Opinion: Although Arbitrum’s price action shows a correction, the number of unique users in Arbitrum has been steadily increasing highlighting the potential of the network. It will be interesting to keep an eye out on Arbitrum during the coming weeks.
Conclusion
The US Federal Reserve has increased interest rates to 5.25%, the highest in 16 years. While the crypto market has historically dropped following such rate hikes, it held its ground this time. Coinbase and Gemini are expanding offshore to hedge against adverse regulatory risk in the US. Ethereum’s gas fees have reached the highest level since May 2022 due to increased memecoin trading. The total crypto market cap dropped by 1.75% or $20 billion, with Bitcoin Cash up by 3.72% and Arbitrum down by 16.52%. Despite a correction in Arbitrum’s price action, its number of unique users has steadily increased, highlighting the potential of the network.
