• Investors across asset classes have been closely monitoring the US Federal Reserve’s monetary policy as it sets the stage for a risk-on or risk-off environment.
• The strong rally in the US stock markets and cryptocurrencies over the weekend suggests that market observers anticipate the US Fed to slow down its rate hikes.
• Market observers must keep an eye on the macroeconomic data such as the Consumer Price Index and news specific to the crypto space to gain insight into the direction of cryptocurrencies.
The US Federal Reserve’s monetary policy has been dominating the attention of investors across asset classes. As the Federal Reserve sets the stage for a risk-on or risk-off environment, market participants have been keeping a close watch on the developments. The recent rally in the US stock markets and cryptocurrencies over the weekend suggests that market observers anticipate the US Fed to slow down its frantic pace of rate hikes.
The optimism was fuelled by the greater-than-expected slowdown in wage gains in the December jobs report and the first contraction in US services industry activity since May 2020. Market participants must keep an eye on the macroeconomic data such as the Consumer Price Index due on Jan. 12 to gain insight into the direction of cryptocurrencies.
Cointelegraph explores how Bitcoin and altcoins could react to the current bullish momentum in the market. The cryptocurrency markets may benefit from a risk-on environment, however, the extent of the up-move may be limited because of the issues plaguing Digital Currency Group. Therefore, along with the macroeconomic data, crypto traders must also keep an eye on the news specific to the crypto space.
The S&P 500 index broke above the 20-day exponential moving average of 3,875 on Jan. 6, which suggests that the uncertainty has resolved in favor of the buyers. The daily cryptocurrency market performance also appears to be in favor of the bulls. The strength in the S&P 500 and the weakness in the US Dollar Index could boost the crypto prices higher.
Investors must monitor the news and macroeconomic data to gain insight into how the cryptocurrency markets will move in the near future. With the current bullish momentum in the market, it will be interesting to see how Bitcoin and altcoins react in the coming days.