Cardano, Avalanche Lead Fed-Driven Crypto Rally, Traders Still Wary of Long-Term Recovery

Crypto markets added nearly 5% to their overall capitalization in the past 24 hours after broader markets jumped following Fed's interest rate hike.

AccessTimeIconMay 5, 2022 at 9:56 a.m. UTC
Updated May 11, 2023 at 6:58 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Tokens of cardano (ADA) and avalanche (AVAX) led gains among major cryptocurrencies in the past 24 hours. The recovery follows a jump in the broader markets after the U.S. Federal Reserve raised rates on Wednesday.

The overall crypto market added capitalization of 4.9%, almost reaching the level in early April of $2 trillion. Bitcoin (BTC) and ether (ETH) were up 5%, nearing pivotal resistance levels of $40,000 and $3,000 respectively.

Liquidations on crypto-tracked futures remained relatively low, despite the move. The market saw $177 million in liquidation losses in the past 24 hours, suggesting the rally was mostly driven by spot assets.

ADA spiked as much as 14% during early Asian trading hours before dropping slightly to the $0.86 level. The driving factor for the token was demand from retail traders, as on-chain data shows a 186% rise in the number of wallets holding ADA for 30 days or longer.

SOL jumped 9% to just over $93, while Avalanche’s AVAX jumped as much as 12%. Other majors like BNB Chain’s BNB and XRP rose just over 5%, mimicking bitcoin’s move.

SOL was partly buoyed by fundamental improvements to the Solana Pay product. Developers added a transaction request feature that would now allow merchants to provide customized transaction links to users, such as unique non-fungible tokens (NFTs) or virtual gifts.

SOL rose above resistance at $88 Wednesday night. (TradingView)
SOL rose above resistance at $88 Wednesday night. (TradingView)

Previously, Solana Pay allowed only one-way transfers between users and merchants, as reported on Thursday.

U.S. markets recover after Fed hikes rates

The moves came amid a broader market recovery in the U.S., which likely served as a bullish sign for investors. The Fed raised interest rates by 50 basis points, and Fed Chairman Jerome Powell said similar moves can be expected in June and July.

Powell addressed growing concerns around surging inflation in a meeting on Wednesday, stating the Fed would move “expeditiously to bring it back down.” Powell added the move could cause “some pain” in the economy as it took steps to deal with inflation.

The Fed’s confidence in tackling a slowing economy led to a moves up in financial markets: Equity markets in the U.S. jumped, with technology-heavy Nasdaq ending the day 3.19% higher and S&P 500 gaining 2.99%.

Some traders and developers said the economic decisions in the U.S. fueled Wednesday night's rally in cryptocurrencies, but the sentiment for longer-term recovery remains mixed.

"Going into the meeting we have seen risk-off action across the board in global markets, crypto inclusive. The 50 bps (basis point) rate hike was the most likely outcome of the FOMC (Federal Open Market Committee) meeting and the narrative has shifted to the Fed being in control and no longer behind the yield curve," Kurt Grumelart, a trader at crypto fund Zerocap, said in a Telegram message.

Johnny Lyu, CEO of crypto exchange KuCoin, said in a Telegram chat that market participants expected volatility ahead of Wednesday's Fed announcement. "The focus of the market was the announcement of the final decision of the FOMC to raise the benchmark interest rate by 50 points to the range of 0.75%-1.00%. This was the largest rate hike since May 2000," he said.

"We can see that Powell ruled out a 75 basis point rate hike and expressed confidence that the U.S. could avoid a recession, a so-called hard landing, as the Fed raises borrowing costs to reduce high inflation," Lyu explained, adding Wednesday's bounce in cryptocurrencies showed that despite the macroeconomic pressures, the cryptocurrency market remained "surprisingly strong in relative terms."

Anton Gulin, a regional director at crypto exchange AAX, said much of the moves came from an underlying correlation between U.S. equities and the global crypto market.

"The expectations were worse than the actual outcome, therefore we can see recovery across all markets. The correlation between crypto and stock markets has always been quite manipulative," Gulin said. "The following month is gonna be the interesting cause as we know: "Sell in May and go away"."

Some like Zerocap's Grumelart remain wary about that correlation. "While we don't explicitly expect more downside (particularly because we are near a long-lasting support base), you can't look past current headwinds and high correlation to traditional markets," he said.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

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.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.