The cryptocurrency market traded flat in the last week, even as major cryptocurrencies traded in the red. The market capitalisation stayed above $1 trillion. However, major digital tokens like Bitcoin and Ethereum fell by over 3.5 per cent.
On Friday at 4 PM, Bitcoin had the highest market cap and was trading at $23,157, over 3.6 per cent below the price seven days ago. However, in the last 24 hours, it gained over 1 per cent.
Ethereum, the second largest cryptocurrency, was trading at $1,661, 2.27 per cent up in the last 24 hours. However, in the last seven days, it has fallen 3.7 per cent.
On Friday, the Reserve Bank of India (RBI) hiked the repo rate by 50 basis points to 5.4 per cent to control the surging inflation. In India, inflation has stayed above the upper tolerance level of 6 per cent for six months.
However, the rate hike by the RBI is unlikely to impact the crypto prices in India, according to experts.
“RBI's MPC meetings on a standalone basis have very minimal or no impact on the global cryptocurrency markets. Historically, Bitcoin prices always react to US FOMC meeting outcomes.” Jaikrishnan G, Partner, Financial Services Consulting, Grant Thornton Bharat, said.
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He continued, “On a macro-level, all the major economies have hiked the policy rates lately so as to control inflation and this is bound to have a short-term negative effect on crypto prices.”
Experts still ringing bells of caution
Global inflation has continued to stay high. Even after cooling off marginally, the commodity prices haven't reached the same levels as six months earlier. Experts believe that investors still need to be cautious.
“We are expecting a range-bound movement in the crypto market but something negative in terms of inflation, recession or regulatory issue may dent the sentiments and trigger sell-off again,” Dileep Seinberg, Founder & CEO of bill payment & utility Crypto platform MuffinPay, said.
On Thursday, the UK's central bank, the Bank of England, raised the interest rates by the most in 27 years to 1.75 per cent. It warned that the country would enter a recession by the end of 2022 and will last until the end of 2023.
On July 27, the federal reserve (Fed) also hiked its key interest rate by 75 basis points. The country's GDP has contracted for the second consecutive quarter, with inflation above 9 per cent.
“Over the next few weeks, given the sentiment of rate hikes across expected lines in the future, with the need to give growth a spurt, the markets will factor in the macro environment, and we see strong consolidation at key support prices,” CoinDCX's research team told Business Standard.
However, some experts remain optimistic about the future of cryptocurrency in India.
“While cryptocurrency prices have remained flat overall, there seems to be some inflexion in the coming weeks,” Raj A Kapoor, founder & CEO of India Blockchain Alliance, said, “I truly believe that crypto will be a net positive in 2022 because any short declines driven by rate hikes will be offset by greater institutional and retail active trader adoption of this asset class.”