Crypto Assets Move Higher Despite Fed Announcement
Crypto investors may have been expecting a 25 basis point rate hike from the Federal Reserve, but the announcement didn‘t stop them from sending bitcoin and other cryptos higher. As more economic data pours in, will crypto assets continue to move higher? Waves‘ USDN token is also exiting its stablecoin model in an XTN rebrand, which could have significant implications for the crypto market. According to CoinDesk Market Index (CMI), bitcoin (BTC) is up 3.7%, Ethereum (ETH) is up 5.7%, and the S&P 500 is up 1.0%. Gold and Nikkei 225 are also up 2.0% and 0.1%, respectively. With the crypto market showing signs of strength, investors will be watching to see if these gains can be sustained.
Bitcoin Soars Past $24,000 Following Fed Rate Hike
The Federal Reserve‘s decision to raise interest rates by 25 basis points has had a positive effect on Bitcoin, pushing it past its former $23,000 threshold. After lingering below $23,000 for much of the past week, BTC soared past $24,100 at one point Wednesday, a roughly 3.7% gain over the past 24 hours. Investors seem to be more interested in Fed Chair Jerome Powell’s comments that the U.S. central bank‘s inflation fight is far from over than his remark that “[the] disinflationary process has started.” This news has caused Bitcoin to surge, and it is likely to remain a popular investment option for those looking to capitalize on the Fed’s decision.
Bitcoin Prices Remain Unclear as Interest Rates Rise
As Bitcoin continues to trade near or above $23,000, the future of its prices remains uncertain. While some market observers believe that prices will retreat, others point to more optimistic signs. According to CoinDesk Indices Managing Editor Jodie Gunzberg, historically, moderate rate hikes have resulted in increased returns for Bitcoin, more so than traditional assets. This is due to the fact that speculators return quickly to buy as credit and money become more available. With the Fed’s last two rate hikes being more moderate, it is possible that Bitcoin prices could remain stable or even increase.
Crypto Market Sees Bullish Momentum
The crypto market is seeing a bullish momentum, with Bitcoin and Ether leading the charge. According to analyst Philip Gunzberg, the rising number of Bitcoin on wallets of OTC desks in January is a sign that institutional investors such as hedge funds are buying Bitcoin, pushing up its price. Ether also saw a 5.7% rise since Tuesday, while other cryptos such as Layer 2 network Optimism‘s OPT token and Layer 1 blockchain Aptos Network‘s APT token rose significantly. APT surged 387% last month. This bullish momentum is expected to continue in the coming months, with investors looking to capitalize on the potential of the crypto market.
Fed Announcement Boosts Equity Markets
The Federal Reserve‘s announcement of a 25 basis point rate hike has been welcomed by equity markets, with the tech–heavy Nasdaq and S&P 500 rising 2% and 1%, respectively. This rate hike is lower than the 7% inflation that was previously indicated, and markets have responded positively. Oliver Rust, head of product at Truflation, an independent economic data–aggregator, commented that markets have been proved right today. This rate hike is a sign of confidence in the economy, and investors are encouraged to take advantage of the current market conditions.
META Platforms’ FRL Division Continues to Struggle: Fourth Quarter Losses Reach $4.3 Billion
As investors look to new data over the next two days, including jobless claims and fourth quarter earnings from tech giants Amazon and Google, Meta Platforms (META) reported a continued loss of massive amounts in its Facebook Reality Labs (FRL) division. The FRL division, which comprises augmented and virtual reality operations, reported a fourth quarter loss of $4.3 billion, better than the consensus of analyst estimates of $4.4 billion, but up from a loss of $3.7 billion in the third quarter. Despite the losses, META remains optimistic that its FRL division will eventually turn a profit.
Crypto Market Booms in January: Bitcoin’s Largest Monthly Increase Since October 2021
January was a great month for the crypto market, with bitcoin experiencing its largest monthly increase since October 2021 and other digital assets faring even better. According to CoinDesk Indices‘ January markets report, the macroeconomic environment has been turning brighter, with decelerating inflation and expectations that the Fed will dial back the pace of interest rates. This, combined with a falling dollar, has been propelling the crypto market. CoinDesk‘s head of research, Jessica Gunzberg, noted that cryptos‘ rising volatility relative to traditional asset classes is a sign of optimism, and that investors are turning to crypto as credit and money become more available.
Smart Contract Platforms Lead the Charge in the CoinDesk 20
Today, the CoinDesk 20 is dominated by smart contract platforms, with Loopring (LRC), Polygon (MATIC), and Cosmos (ATOM) leading the charge. These three tokens have seen impressive returns of 14.9%, 11.6%, and 10.9%, respectively, making them the biggest gainers in the CoinDesk 20. Surprisingly, there are no losers in the CoinDesk 20 today, indicating a strong bullish sentiment in the crypto markets.
The Failure of Algorithmic Stablecoins
The rise and fall of Terra‘s UST token was a cautionary tale for algorithmic stablecoins. UST was meant to be backed by a basket of assets and maintain a $1 value, but it fell over 90% to a few cents when the Terra ecosystem imploded last May. Prices of Terra‘s luna tokens suffered even more, dropping 99% within days to nearly zero. The failure of UST and LUNA was due to the way algorithmic stablecoins are designed – one UST could be redeemed or minted for exactly $1 worth of LUNA at any time, which theoretically helps UST retain its value and creates demand for both tokens. Unfortunately, this system failed in the case of Terra‘s UST and LUNA tokens.
The Rise and Fall of Terra’s UST: A Tale of Algorithmic Stablecoins
Terra‘s UST was once a shining example of a successful algorithmic stablecoin, but it quickly became a cautionary tale of how these tokens can fail. UST was backed by a basket of assets that were supposed to maintain its $1 value, but it quickly fell over 90% to a few cents as the Terra ecosystem imploded last May. Prices of Terra‘s luna tokens suffered even more, dropping 99% within days to nearly zero. The cause of this collapse was due to how algorithmic stablecoins like UST operate. UST could be redeemed or minted for exactly $1 worth of LUNA at any time, creating a demand for both tokens and incentivizing traders to maintain UST‘s peg. Unfortunately, this system was not enough to save UST from its ultimate demise.
DeFi Stablecoins Adapting to Survive
The recent Terra stablecoin fiasco has caused DeFi developers to be more wary of launching algorithmic stablecoin projects. However, some projects have adapted and rebranded, such as Djed on Cardano, which is now an overcollateralized token with $1 of Djed backed by between $4 to $8 worth of Cardano–based tokens. Neutrino, which issued the USDN stablecoin on Waves blockchain, also floated a community vote last year to move away from an intended $1 peg altogether, which was passed earlier this week. These changes demonstrate how DeFi stablecoins are adapting to survive in the current market.
USDN Stablecoin Pivots to New Model in Waves Ecosystem
The USDN stablecoin has been a reliable option for those looking to store value, but the unprecedented market volatility has caused it to depeg. Despite this, the Waves team and community believe that USDN can still perform a valuable use case in the Waves ecosystem by pivoting to a different model. Waves founder Sasha Ivanov defended the 9 cent slip in August, and the Neutrino developers are confident that USDN can still be a valuable asset in the Waves ecosystem.
XTN Stablecoin Collateralized by Waves Ecosystem Tokens
XTN is a new stablecoin that is collateralized by a basket of tokens from the Waves ecosystem. The value of XTN will float based on the supply and demand of the coin and the Backing Ratio (BR). The BR is the total value of all assets held in collateral against the circulating supply and is targeted to reach 100%, making the price of XTN tend towards $1 for increased stability. XTN is a great option for those looking for a stablecoin that is backed by a variety of tokens from the Waves ecosystem.
USDN Pivots to XTN: SURF Token to Remain
USDN is undergoing a pivot to XTN, and the role of SURF, a token issued to recapitalize USDN reserves, will remain. The roadmap for the pivot includes the development of functionality in January, the release of a technical litepaper in late January, and a full rebrand of USDN to XTN in mid–February. Additionally, $15 million of ecosystem tokens will be added as collateral through governance between February and April. This pivot to XTN will ensure that USDN remains a reliable and secure stablecoin, and that SURF token holders will continue to benefit from the token‘s role in the network.
