As expected, the days leading up to the rate hike day on July 27 had some noticeable volatility. On July 26, BTC saw a slight dump from $22k to $21k but ETH, which previously led the market, dropped from $1.55k to 1.37k. The sell-off was likely a derisking event by traders in anticipation of the FOMC meeting, which turned out to be in line with market expectations i.e. 75bps hike. On the surface, it does not change the fact that inflation is still high, which also marked the first time in the modern history of the Fed that it has had back-to-back 75bps hikes. However, the underlying tone is more suggestive; that the Fed is unwilling to go higher than 75bps because this is likely the peak of inflation. At the same time, Powell acknowledged the negative impact of rate hikes on economic growth and would slow rate hikes based on a data-centric approach.
Some of the interns best work pic.twitter.com/4HHxcUZVe8— Hsaka (@HsakaTrades) July 28, 2022
All these positive factors provided additional fuel for the continuation of the relief rally for the day. Strangely enough, despite the US economy contracting for the second straight quarter (-0.9% GDP at an annualized period for Q2), investors were left unperturbed. We explore more on this below. ETH, in particular, is still outperforming BTC (reaching $1.78k) as ETH/BTC consolidates at the 0.07 range, looking for an opportunity to break out.