Investors remain cautious before the Fed make their move

GB Market Commentary 20/09/2022

by Marcus Sotiriou

Bitcoin and the crypto market saw a significant bounce yesterday, before finding resistance at $19,666 – the 2017 bull market top, a key resistance. Bitcoin remains below $20,000 for now as investors are very cautious ahead of the Federal Reserve decision tomorrow, followed by a news conference with Chair Jerome Powell.

The market is currently pricing in a probability of an 82% chance of a 75 basis point rate hike, and a 18% chance of a 100 basis point rate hike. As the chance of at least a 75 basis point rate hike has been fully priced in by investors, I think a 75 basis point rate hike could be priced in, in the short-term. However, central banks are very aggressive so a short-term rally may be short-lived.

In addition to the Federal Reserve decision tomorrow, there is the Bank of Japan monetary policy decision and Bank of England interest rate decision on Thursday, as well as the US Conference Board leading index - initial jobless claims. We are therefore set up for a very volatile week as investors gain clarity on the decisions of central banks.

Wintermute, a crypto market making firm, has been hacked for $160 million on its DeFi operations. CEO Evgeny Gaevoy has confirmed that the firm remains solvent, however, as its centralised exchange and over-the-counter offerings were not affected.

Gaevoy said, "if you have a MM agreement with Wintermute, your funds are safe. There will be a disruption in our services today and potentially for next few days and will get back to normal after."

This is a negative development within the DeFi space, and it will not help with the confidence of TradFi (traditional finance) institutions who are looking to enter the DeFi space. As Wintermute were one of the biggest liquidity providers in the industry, they may be forced to remove liquidity in order to mitigate further risk from their loss.

Due to the transparency of the blockchain technology, though, the hacker's address where the stolen funds are located has been identified, so there is a chance of the funds being returned.