Cryptocurrency and stock prices dived this week as concerns about the Federal Reserve continued. In the crypto market, Bitcoin dived from $70,000 to about $65,000 while Solana dropped from $200 to $175. Other notable laggards in the industry were meme coins like Pepe, dogwifhat, and Book of Meme.
Fed rate hike hopes fade
The stock market also struggled this week as the Dow Jones, Nasdaq 100, and S&P 500 indices dropped in all days of the week. The Dow Jones and the Nasdaq 100 indices have tumbled by over 3.35% from their highest point this year
Most of these declines happened after the Institute of Supply Management (ISM) published a strong manufacturing PMI report on Monday. The figure showed that the manufacturing sector expanded for the first time since 2022.
A separate report by ADP showed that the private sector created over 184k jobs in March, signalling that the labor market is still strong. Therefore, these numbers mean that the Federal Reserve will take time before starting to cut interest rates.
In a statement, Raphael Bostic, the head of the Atlanta Fed noted that the bank may not cut them after all. Jerome Powell, speaking at the Stanford University, said that the Fed would maintain its data-dependence.
There is no strong reason to cut interest rates in May and June as some analysts expect. That’s because the core Consumer Price Index (CPI) has remained at 3.8%, almost double the Fed’s target at 2.0%. The US economy is also doing well, with the Atlanta Fed expecting it to have grown by 2.8% in Q1.
Meanwhile, the price of crude oil is still going upwards as tensions in Europe and the Middle East continues. Brent jumped to $90 for the first time in six months. The West Texas Intermediate (WTI) has risen to $86 and formed a golden cross, signalling that more gains are possible.
Fear and greed index has retreated
All these macro factors explains why cryptocurrencies and American stocks have retreated in the past few days. It also explains why a sense of fear is spreading in the financial market.
For example, the CNN fear and greed index has dropped from the extreme greed zone of 85 to the neutral point at 49. The only sub-index in the extreme greed zone was the stock price breadth, which is estimated by the McClellan Volume Summation Index.
Market momentum, stock price strength, and put and call options have moved to the greed zone while the market volatility is in the extreme fear zone.
Meanwhile, the crypto fear and greed index has dropped from the extreme greed zone of 83 to about 75 as most coins have plunged recently.
The VIX index, which is the best measure of volatility in the market, has surged to $16.35, much higher than the year-to-date low of $12. The dollar index (DXY) has jumped to $104, which is also higher than the YTD low of $100.
