Weekly Crypto Radar: US-Iran war, Fed rate decision, $173 million token unlocks
- The war in the Middle East rages on as Trump appeals to allies to help secure the Strait of Hormuz to curb rising oil prices.
- Markets fully price in a Fed decision to leave interest rates unchanged at Wednesday’s FOMC meeting.
- Over $173 million in token unlocks this week, led by a $55 milli LayerZero release, could drive market volatility.
The cryptocurrency market broadly recovers on Monday, with Bitcoin holding above $73,000 after a pullback from its weekly high of $74,509. Despite the war in the Middle East, crypto prices have steadied, suggesting that investors see the asset class as a hedge against macroeconomic uncertainty and geopolitical tensions.
This article provides an overview of what investors should look forward to this week, including the ongoing US-Iran tensions, major economic events, key protocol developments, and token unlocks.
Trump seeks NATO, China's help to reopen Strait of Hormuz
United States (US) President Donald Trump has called upon NATO allies to provide military support to stop Iran’s control over the Strait of Hormuz. The shipping route has put a chokehold on 20% of global oil supply, as the Iranian blockade remains in place. Oil prices rose to $100 earlier in the day but have since fallen to $95 at the time of writing.
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In line with elevated Oil prices, which may have a lasting impact on the global economy, President Trump wants the US's NATO allies and China to secure passage for vessels through the Strait of Hormuz.
Despite the president’s request, allies remain less enthusiastic about joining the campaign, with some fearing it could drag them into a wider war, according to NBC News.
The war tensions in the Middle East will likely continue to drive Oil prices higher this week, especially if Iran keeps attacking US allies in the Middle East.
Fed interest rate decision
The increase in energy prices and concerns about inflation rising have significantly dimmed optimism for Federal Reserve (Fed) interest rate cuts. According to CME’s FedWatch tool, markets continue to price in a 99.1% chance that the Federal Open Market Committee (FOMC) will leave interest rates unchanged in the 3.50%-3.75% range this week. Only 0.9% of market participants expect a cut to the 3.25%-3.50%.
Prior to the war, markets generally anticipated a potential summer easing in June followed by another in September. However, with the Iran war driving oil prices higher, the central bank could take a measured approach despite a softening labor market and moderate inflation.
Economists at Goldman Sachs say that “a higher inflation path will make it harder for the Fed to start cutting soon.”
Potential supply shock ahead of $173 million token unlocks
Several token unlock events, totalling $173 million, are expected this week. LayerZero (ZRO) will experience the largest unlock, worth $55.5 million, on Friday. This accounts for 10.3% of the market capitalisation.
Other token unlocks of interest for investors include River (RIVER)’s nearly $29 million on Saturday, Kaito (KAITO)’s $6.52 million on Friday, and Plume Network’s $2.71 million on Saturday.
Token unlocks are considered scheduled supply shocks, which can result in higher volatility. Anticipatory selling can occur before the events. However, the exact impact of the unlocks is nuanced, with instances of pricing in effects.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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