Market Wrap: Bitcoin and Stocks Briefly Dip After Fed Comments; DOGE Rallies

Bitcoin (BTC) traded in a choppy range on Tuesday after U.S. Federal Reserve Governor Lael Brainard said the central bank could reduce the size of its balance sheet at a rapid pace.

“The [Federal Open Market Committee] will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting,” Brainard said in a speech written for a Minneapolis Fed discussion.

BTC dipped by 3% following Brainard's statements, but stabilized later in the New York trading day.

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A more aggressive approach to tightening central bank policy sent jitters through the market as investors reduced their exposure to speculative assets. Stocks declined while the 10-year Treasury yield spiked to its highest level since May 2019.

In crypto markets, dogecoin (DOGE) rallied as much as 17% over the past 24 hours following Twitter’s (TWTR) announcement of Tesla (TSLA) CEO Elon Musk joining its board of directors. Meanwhile, SHIB, another dog-themed meme coin, was up 4% on Tuesday compared with a 13% decline in WAVES and flat performance in BTC over the same period.

The dispersion in crypto returns on Tuesday indicates some uncertainty among traders, which is particularly evident in the bitcoin futures market.

For example, the average bitcoin funding rate, or the cost of holding long positions in the perpetual futures listed on major exchanges, has remained below positive for the 122nd consecutive day on Binance and Bybit, according to data compiled by Arcane Research.

"However, since BTC broke out above $45,000 last week, funding rates have normalized around neutral territory, suggesting that there is balanced demand for long and short positions at the moment," Arcane wrote in a Tuesday report.

And for ether, FundStrat noticed that funding rates have been positive for 10 consecutive days. That suggests traders are more bullish on ETH than BTC, which typically occurs during an up market.

Further, blockchain data shows that short-term bitcoin holders have been accumulating positions since BTC's recent price low set on Jan. 22, according to Glassnode.

Still, the average volume of BTC supply held in long-term holder (whale) addresses has plateaued. "This generally suggests that this wallet cohort are contributing the least to the current accumulation trends," Glassnode wrote in a blog post.

Most digital assets in the CoinDesk 20 ended the day higher.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.