Dogecoin Leads Gains in Major Cryptos Ahead of Fed Meeting

The crypto market advanced for a second day after plunging over the weekend.

AccessTimeIconJan 26, 2022 at 10:56 a.m. UTC
Updated May 11, 2023 at 5:29 p.m. UTC

The broader crypto market recorded its second day of growth ahead of a U.S. Federal Reserve statement on Wednesday. Prices of bitcoin (BTC), ether (ETH) and other major cryptocurrencies rose as much as 7% in the past 24 hours, with meme coin dogecoin (DOGE) leading gains among the biggest assets by market capitalization.

Terra's LUNA tokens were among the only losers, posting a 4.6% decline, data from analytics tool CoinGecko showed.

Major cryptocurrencies continued the second day of recovery on Wednesday. (TradingView)
Major cryptocurrencies continued the second day of recovery on Wednesday. (TradingView)

Wednesday’s Fed meeting may reveal the bank's stance on the timing of an interest rate increase that many observers expect will come in March. The Fed has said it will tighten monetary policy with up to four hikes this year to keep inflation in check, prompting a sell-off in asset markets across the globe during the last few months. Bitcoin fell as much as 25% in the past month, while the crypto market has lost upward of $1 trillion in market capitalization in the same period.

Some analysts say a tightened policy could see investors flee into safer assets, which could, in turn, lead to a further drop in cryptocurrency prices.

“If the regulator tightens its rhetoric and announces the upcoming rate hike as early as March, all risky assets, including cryptocurrencies, could suffer significantly,” Alex Kuptsikevich, a senior financial analyst at FxPro, said in an email to CoinDesk.

Bitcoin held above $37,000 in European morning hours on Wednesday after dropping to under $33,500 on Monday, a move that caused the majors to fall as much as 25% at the time. The market has since recovered, with bitcoin, solana (SOL) and ether rebounding to last week’s price levels.

Tokens of some layer 1, or base, blockchains led gains outside of the top 10 cryptocurrencies by market capitalization. Polygon (MATIC) and near (NEAR) have surged over 11% in 24 hours as investor demand rebounded after Monday’s drop.

Prices of MATIC were buoyed by the appointment of ex-YouTube gaming head Ryan Wyatt as CEO of Polygon Studios, a development lab that supports the creation of blockchain games and non-fungible tokens (NFT) on the Polygon network. Wyatt previously led YouTube's virtual- and augmented-reality projects and is expected to structure partnerships and investments in the Polygon ecosystem.

MATIC hit resistance at $1.60 after a surge in the past 24 hours. (TradingView)
MATIC hit resistance at $1.60 after a surge in the past 24 hours. (TradingView)

Some traders said a correlation between crypto prices and risky assets such as technology stocks exists as they share a similar set of investors.

“Crypto is owned by the same people that own growth stocks," Haseeb Qureshi, founder of crypto investment fund Dragonfly Capital, said in a telephone interview. "When they start cutting risk, they cut back on crypto. That’s how the correlation is built.”

Cause for concern may be short lived. There are "lots of reasons to believe that the secular macro rate of interest is still low. Interest rates are low because of incremental technology growth. Crypto is one of the few things that people realize has broad growth potential,” Qureshi said.


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Shaurya Malwa

Shaurya is the Deputy Managing Editor for the Data & Tokens team, focusing on decentralized finance, markets, on-chain data, and governance across all major and minor blockchains.