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Crypto Struggles Over Fed Concerns. What could this week have in store?

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Responses to Biden’s executive order on crypto could create more waves.

Key points

  • Bitcoin fell below $20,000 following hawkish comments from the Fed.
  • Some of the responses to President Biden’s executive order on crypto are expected the day after Labor Day.
  • Expect continued hype and speculation as the D-Day merger for Ethereum approaches.

Cryptocurrency sentiment slipped back into “extreme fear” territory last week after Federal Reserve Chairman Jerome Powell said bigger rate hikes were likely. The total crypto market cap once again fell below the $1 trillion market and crypto major Bitcoin (BTC) slipped below $20,000, according to data from CoinMarketCap. As crypto investors wonder if this winter will ever end, let’s take a look at some developments that could impact crypto prices in the coming week.

On Friday, Powell stressed that the Fed was not going to ease high interest rates anytime soon. Crypto prices fell along with stocks as Powell suppressed any hope that he would reverse his hawkish stance. The central bank wants to curb the spiral of inflation. What is clear from Powell’s words is that price stability is the primary goal, even if it hurts some businesses and households.

Tighter monetary policy is pushing investors away from riskier assets like crypto. This has played a huge role in the decline in crypto prices over the past nine months, and further rate hikes could mean crypto will be more painful. The Federal Reserve will meet on September 20 and 21 to continue raising interest rates. Many are now expecting another 0.75% increase.

What could this week have in store?

It will be more than three weeks before we know for sure what action the Fed will take next. But the Fed isn’t the only show in town, especially as we may get more clarity on how the US will handle crypto regulation. Here’s what to expect from crypto in the near future:

1. Responses Due to President Biden’s Executive Order

It has been nearly 120 days since President Biden asked various organizations, including the Treasury, the Department of Justice, and the Department of Commerce, to submit reports on various aspects of crypto and cryptography regulation. Many of these responses are expected just after Labor Day, and insiders will be paying close attention.

The cryptocurrency market initially responded positively to the tone of the executive order, but all eyes will be on the details of each proposal. For example, we will have a better idea of ​​whether the United States could launch its own digital dollar, whether stablecoins may face heavy restrictions, and what other rules could help or hinder crypto projects.

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2. More progress towards Ethereum merger

The first of two stages of Ethereum’s (ETH) transition from proof-of-work to proof-of-stake is scheduled for September 6, with the other expected to follow shortly thereafter. This is a big step for the project and for the whole industry. Be aware that it has also been hyped for some time and speculation by short-term traders could impact the price of Ethereum in the short term.

Pay attention to all reviews of your crypto wallet or crypto exchange. Some exchanges will suspend ETH deposits and withdrawals during the merger. The Ethereum team also warned that criminals could try to take advantage of the changes with phishing attempts and other fraudulent schemes. Be extremely alert to suspicious activity.

3. Ongoing volatility

Bitcoin languished below $20,000 for much of the weekend before rallying slightly today. However, we are still in choppy waters and many analysts are short-term bearish. Some traders believe the crypto major could fall to $17,000 – which would be its lowest since November 2020.

At the end of the line

With so much economic uncertainty and no guarantee that the Fed can get inflation under control in the near term, crypto prices could take a while before they even start to rally. What is important is to focus on your long-term view of Bitcoin and cryptocurrency. Only invest money you can afford to lose, and make sure you have your emergency savings and other financial basics. There’s a lot we don’t know about the coming months, so it’s important to prioritize your financial well-being over risky assets like crypto.