After initially surging more than 4% early this morning during Asian trading hours, top cryptocurrencies Bitcoin (BTC 6.62%), Ethereum (ETH 3.81%), and Dogecoin (DOGE 24.57%) have each moved lower in early afternoon trading. As of 1 p.m. ET, these three tokens have slumped 1.5%, 2%, and 2.2%, respectively, over the past 24 hours.
Interestingly, the moves for these top tokens tracked the price action for global equity markets quite closely. Most major Asian indices moved higher overnight. However, U.S. equity markets have moved lower today as investors await the release of the most recent Federal Open Market Committee (FOMC) meeting minutes. Concerns around the forward hiking schedule of the Fed saw bond yields shoot higher today, affecting all risk assets, including major cryptocurrencies.
Investors across all risk assets appear to be remaining cautious right now given uncertainty tied to the steps the Federal Reserve intends to take to bring down inflation. With bond yields moving to such a wild degree this year, investors have had a difficult time anticipating when a shift toward more accommodative monetary policy might come about.
For cryptocurrencies, it's clear that the very dovish monetary policy mandate from the Fed following the pandemic provided the fuel for an incredible bull-market rally through the end of 2021. Accordingly, given the decline in higher-risk asset classes following a very hawkish shift, investors looking for the next surge in cheap money-fueled speculation await some additional clarity from the Federal Reserve as to how the central bank is thinking about the issues at hand.
In general, since the onset of the pandemic, the crypto market has traded in a relatively high correlation to equity markets. In fact, as of May this year, the crypto sector's correlation to equities hit its highest level ever. Accordingly, how stocks perform matters a great deal for the higher-beta (higher-volatility) performance of this higher-risk asset class.
Today's price action across both equity and crypto markets will certainly be interesting to watch. Investors might get a sneak peek into how these assets will perform through the end of the year, depending on the commentary provided this afternoon.