Powell and the Fed sink cryptos; Bitcoin loses $22,000

The words of Jerome Powell, chairman of the Federal Reserve (Fed), before the Senate Banking, Housing and Urban Affairs Committee felt like a kick in the stomach to the market. The central banker made it clear that the latest data did not give the Fed much leeway and, therefore, investors should prepare for a new "higher than expected" terminal rate of interest rates.

"Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy," he stressed. It should be recalled that Powell will appear before U.S. policymakers again today, on Wednesday, this time before the House of Representatives.

The consequences were not long in coming. U.S., Asian and European markets closed lower and the declines are expected to continue thoday. On top of that, interest rate expectations have been turned upside down. According to CME's FedWatch tool, there is now a 70.5% probability that the Fed will hike rates by 50 basis points at its March 22 policy meeting. Last Monday, the probability of such a scenario hovered around 30%.

"Pricing also suggests 100bp hike in the next four meetings. And swap markets price in a peak Fed rate of 5.6%. That was around 4.90% at the start of the year," explained Ipek Ozkardeskaya, senior analyst at Swissquote Bank. BlackRock experts go further and put the final rate at the 6% level.

All the experts are clear: the upcoming data are key to reversing this situation. Firstly, the ADP employment report due today could give an idea of what the official data to be published on Friday will be like, of which Ozkardeskaya points out that "we'd better see a moderation". Also, next Tuesday will see the release of the February inflation data for the United States.

In the crypto sphere, there is little to comment on, as Powell and the Fed are the undoubted protagonists of the day. All in all, Naeem Aslam, chief investment officer at Zaye Capital, believes that Bitcoin "seems to remain skewed to the downside." "Traders are concerned with the ongoing situation with Silvergate. No one wants to see more glooming news from crypto players but the reality is that so many things were done under the table that it is difficult not to anticipate more and more skeletons coming out of the closet. For the time being, sentiment in the market seems to be negative and it is likely that it will take things time to get back on track," he added.

In other market news, there have been widespread declines in the major altcoins. However, the 2.3% gains in Ripple (XRP) are noteworthy.