FOMC: Rates Unchanged, Signals at March Rate Hike

Federal Open Market Committee (FOMC) meetings are typically exciting for those who enjoy watching price action, and this week’s meeting was no exception. Beading into Wednesday’s FOMC meeting, bitcoin found itself about 5% off of last week’s range.
The FOMC decided to leave rates untouched but signaled for a hike in March’s FOMC. US10Y closed the trading day up 5%, and DXY was up 0.46%. Risk assets like SPX, NDX, and crypto assets wound up pairing back their initial gains as the market digested the Fed’s commentary.
In our market note earlier this week – “Key Trends as Markets Seem Fed Up“ – we highlighted important price levels to watch. The first key level of resistance we identified was $38.5K. Bitcoin started to make a strong move towards this level ahead of yesterday’s meeting, but its rally proved to be short-lived. We saw extreme volatility on the intraday chart as price whipsawed traders with a $1.5K swing in the minutes immediately following the 2 pm FOMC statement release. Prices topped out as high as $38.9K for a very brief moment before falling back towards $37.4K as Fed Chair Powell kicked off the post-meeting press conference. During Powell’s speech, price all but retraced the entire move made in anticipation of his remarks.
In terms of support, $34K has been the clear level in the sand thus far. We are looking for this level to hold (as discussed in last week’s Market Insights post). The rest of this week should be telling.

Funding Turns Negative

Funding turned even more negative post FOMC as investors were spooked by Powell’s resolve to fight inflation.
All in all, it seems like the market is expecting Bitcoin to make a lower low after recently testing the $34k level.

Stablecoin Utilization Falls

Stablecoin utilization rates on major money markets have fallen since Bitcoin hit all-time highs in October last year.
On-chain data shows that utilization of stablecoins on Aave and Compound, the two largest multi-collateral money markets on Ethereum, has fallen as investors pay back their loans. Liquidations have shot up during this volatile period which may have contributed to the deleveraging.
The risk-off sentiment is present in exchange data as well, as we’ve seen open interest on perpetuals decline significantly this year.

NFT Buyers at All-Time High

Despite the broader market downturn, NFT activity remains vibrant. The number of unique wallets buying NFTs this month has doubled from just 5 months ago (380k now vs 190k in August 2021), showing that interest in the space is booming, with a sizeable number of new entrants monthly.
We can reasonably expect many new users are speculators/traders seeking short-term opportunities in the volatile NFT markets. The number of actual long-term collectors is probably much lower. This will be more apparent by observing how many buyers remain if/when the NFT markets start to turn downwards.
For more depth on NFTs, see our Members-only weekly NFT Insights to keep up on the latest trends.

Notable Tweets

Vitalik’s Soulbound

Soulbound

https://vitalik.eth.limo/general/2022/01/26/soulbound.html

— vitalik.eth (@@VitalikButerin) January 26, 2022

Synthetix Roadmap

You didn’t ask for it, but you are getting it anyway. My L222 bootleg @synthetix_io roadmap. They even rugged my blog privileges so I had to post on @viamirror which is better than ghost anyway!

— kain.eth L222 (@kaiynne) January 26, 2022

Free Transactions on Ronin Soon

We are deploying an update to the Free Gas service on Ronin Network at 6PM GMT +7 ~1 hour from now. We expect the update to take at least one hour, and in that time all free transactions on Ronin Network will be unavailable. Thank you for your patience.

— Axie Infinity (@Axieinfinity) January 27, 2022