Crypto Market Slides, Then Rallies After Federal Reserve Holds Steady

Takeaways

• Crypto market tumbles, then rebounds after Fed meeting: The cryptocurrency market initially retreated under the shadow of renewed concerns about US stagflation. But Federal Reserve chair Jerome Powell left interest rates unchanged Wednesday at the latest FOMC meeting and downplayed stagflation risk, then crypto prices rallied.
• Changpeng Zhao, the founder of cryptocurrency giant Binance, receives four months in prison: Zhao pleaded guilty last year to violating money-laundering laws after criminals were allowed to use the exchange with no repercussions.
• The price of ETH drops amid SEC security classification concerns: ETH has declined over the past month. Now, new disclosures from a lawsuit show that the SEC may have considered ETH a security since 2023.
• BlackRock’s first tokenized asset makes waves: BlackRock's BUIDL fund, a pioneering tokenized asset initiative, has swiftly captured nearly 30% of the $1.3B tokenized Treasury market, outperforming competitors like Franklin Templeton’s BENJI offering.
• Major token unlocks set to infuse $4B into crypto market in May: This month will see an influx of $4B worth of tokens unlocked across various projects, with major contributions from Aevo, Pyth Network, and Ripple. The tokens could potentially drive market volatility and impact investor strategies.

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Crypto Markets Slide Amid Stagflation Concerns and Gloomy Economic Data

The cryptocurrency market has retreated under the shadow of renewed concerns about US stagflation.

Federal Reserve chair Jerome Powell left the benchmark federal interest rate at between 5.25% and 5.5% at the latest FOMC meeting Wednesday, citing sticky inflationary pressures and a lack of recent progress toward their 2% inflation target. However, Powell downplayed the idea of needing additional rate hikes.

“It’s unlikely that our next policy move would be a rate hike,” Powell said.

Economic data revealed a slowdown in US GDP growth to 1.6% this quarter and a 3.4% increase in the PCE index – the Federal Reserve’s preferred inflation metric. However, Powell also downplayed the notion that stagflation had arrived.

“I don’t really understand where that’s coming from,” Powell said. “I don’t see the stag or the flation.”

After BTC had reached an almost two-month low at roughly $57,000 on Wednesday, the price rallied to $59,269.80 as of press time Thursday.

Binance Founder Changpeng Zhao Sentenced to Four Months in Landmark Case

Changpeng Zhao, the billionaire founder of Binance, received a four-month prison sentence Tuesday after pleading guilty to charges related to inadequate anti-money laundering measures. In a Seattle federal court, US District Judge Richard Jones emphasized Zhao's failure to comply with essential regulations despite having the necessary resources.

The sentence was significantly lighter than the three years sought by federal prosecutors, reflecting Zhao's cooperation with authorities, including a November plea deal that concluded a multiyear investigation.

Zhao also agreed to pay a $50M fine and stepped down as CEO as part of the settlement, although he retains a substantial ownership stake in Binance. Meanwhile, Binance continues to face legal challenges, including lawsuits from the SEC and the Commodity Futures Trading Commission.

ETH Prices Slip As Ether’s Status As Security Back in the Spotlight

ETH's price fell to a weekly low on Wednesday, dipping to $2,814.12, after a lawsuit from Consensys against the US Securities and Exchange Commission became public.

The SEC has considered ETH a security since March 2023, according to the suit. That marks a stark 180 from public statements made by SEC chair Gary Gensler and other SEC officials who had suggested that ETH might not meet the criteria of a security because it’s decentralized.

The move comes just days after Consensys moved to preemptively sue the SEC ahead of the regulator’s upcoming enforcement action against the company. If the SEC successfully takes action against Consensys, it could have major implications for one of the most popular crypto wallets in the world.

BlackRock Dominates the Tokenized Treasury Market With BUIDL Fund

In just six weeks since launch, BlackRock's first tokenized asset fund, BUIDL, has rapidly grown to become the market leader in the tokenized Treasury sector, now holding nearly 30% of the $1.3B market.

Last week alone, BUIDL experienced an impressive $70M in inflows, surpassing Franklin Templeton’s BENJI offering, which saw minor outflows and currently manages $368M. This growth was significantly bolstered by Ondo Finance’s OUSG token, which uses BlackRock’s BUIDL as a reserve asset and attracted $50M in inflows.

The surge underscores the increasing interest in tokenizing real-world assets like US Treasuries, highlighting market appetite for this kind of product.

Crypto Speculators Expect $4B Worth of Tokens Will Be Unlocked

The cryptocurrency market could experience notable dilution and potentially further selloff as $4B worth of tokens from 21 different projects are set to be unlocked. This includes nearly $2.5B from just two projects, Aevo (AEVO) and Pyth Network (PYTH), which account for about two-thirds of the total anticipated unlocks.

Additionally, Ripple is expected to release 1 billion XRP tokens valued at approximately $500M. These could lead to increased market supply and possible price volatility, impacting investor strategy and market stability.

Prior token unlocks would suggest that at least some of these projects could face downward price movements in the aftermath of the unlocks, as investors seek to cash in new holdings.

-From the Gemini Trading Desk