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Altcoins lead market retrace ahead of release of Fed minutes

source-logo  theblock.co 21 November 2023 17:07, UTC

Altcoins took the brunt of Tuesday's market retrace as investor caution increased ahead of the release of minutes from the U.S. Federal Reserve's November meeting.

Bitcoin fell 0.8% over the past 24 hours to $36,976 at 11:40 a.m. ET, according to CoinGecko.

The decrease in value of the world's largest digital asset by market capitalization was overshadowed by the decline experienced by altcoins, such as Solana and ether. In the past 24 hours, ether slipped below the $2,000 mark to $1,990, a fall of over 3%. Solana fell further in the same period, dropping by almost 7% to now change hands at $55.35.

"Bitcoin has not sold off as much as other coins because when it is compared to other assets, like Solana and ether, it is considered far safer, less volatile, and a lower beta asset," Bitfinex analysts told The Block.

Solana's value declines

According to CoinShares Head of Research James Butterfill, Solana's recent rally was primarily driven by speculation. "In contrast, we continue to see much greater growth in total value locked on the Ethereum network and much greater growth of Layer 2 solutions such as Abritrum and Optimism relative to Solana, while the Ethereum developer count is five times the size of Solana's," Butterfill told The Block.

In contrast to the sliding value of Solana and other blue-chip altcoins was BNB's rally. The token that is used to pay transaction fees on the Binance cryptocurrency exchange increased by 6.3% in the past 24 hours. BNB's rally comes after a report that the U.S. Department of Justice is seeking $4 billion from Binance as part of a proposed resolution of a years-long investigation into the world’s largest cryptocurrency exchange.

Analysts at Bitfinex characterized the current market conditions as being influenced by heightened volatility and uncertainty. "We expect traders will view bitcoin as a safe haven in times of uncertainty, rather than completely switching to the dollar. A lot of the new money which has entered the market is more hopeful and optimistic about crypto as a whole and will maintain exposure to the market, even when there is a correction, by holding bitcoin,” the analysts added.

Fed minutes release

On Tuesday, the Federal Reserve will release the minutes of the last Federal Open Market Committee meeting. Due to be released at 2 p.m. ET, the minutes will be closely watched by investors for clues about the direction of monetary policy and its potential impact on the cryptocurrency market.

At the last FOMC meeting, the U.S. central bank paused the benchmark interest rate in the 5.25% to 5.5% range. The move was interpreted as somewhat dovish by markets. However, Fed Chair Jerome Powell added nuance in a press conference after the rate announcement.

"We're not confident that we haven't, we're not confident that we have reached that sufficiently restrictive plateau," Powell told reporters. His words sowed enough uncertainty to keep global markets cautious.