GB Market Commentary 16/03/2022
by Marcus Sotiriou
Today is the first day since 2018 in which the Federal Reserve will raise rates as the U.S. struggles with soaring inflation. Fed chairman Jerome Powell will hold a press conference, where he will be asked about the central bank’s plans for future rises. Earlier this month, Powell said they will likely emulate a rate hike similar to that of 2004, where the Federal Reserve raised rates by 25 basis points 17 times. We will have more clarity today if the Federal Reserve still plans on carrying out a slow and steady rate hike which will not shock the market. We can expect high volatility today which occurs around any major event.
Leading into the press conference this evening at 6pm UK time, Bitcoin is currently seeing some buy pressure. We could see some short term relief in the market over the coming days/weeks as protective positions unwind after today’s highly anticipated rate hike. However, I think Bitcoin and the crypto space is unlikely to gain significant traction in 2022. This is because the Federal Reserve is taking liquidity away from markets and people may have less money to spend on ‘risky’ investments due to surging inflation. Mike Novogratz, CEO of Galaxy Digital (which focuses on crypto assets), agrees with this thesis as he told Bloomberg yesterday, “I don’t think Bitcoin can rally aggressively until we see a pause, because to bring new people in, it’s hard when their house is on fire.”
After yesterday’s news regarding Binance seeking a headquarters in Dubai, FTX Europe has now received a license to operate a crypto exchange in the country. The exchange will also set up a regional headquarters in Dubai. In addition, the Financial Conduct Authority (FCA), the U.K.’s financial watchdog, is searching for someone to head the digital assets department and build a new team, according to a job post on LinkedIn. After the FCA’s stringent crypto policies in recent weeks, this is a step in the right direction. With the U.S. and many other countries becoming more accommodative towards crypto, I am hopeful that the U.K. will try to not get left behind.