The crypto market has responded well to the Federal Reserve’s decision to accelerate tapering, and Layer 1 coins are among the biggest winners.
Avalanche, Fantom, Kadena, Terra, and other Layer 1 coins have posted double-digit gains today.
Layer 1 Projects Rally on Fed Meeting
Layer 1 projects are leading the market again. According to data from CoinGecko, Avalanche is up 15.4% today, Terra has jumped 10.1%, and Solana has risen 9.9%. Other lower cap projects like Fantom and Elrond have also rallied with double-digit recording gains. Kadena, a Proof-of-Work Layer 1 project, outperforms all of them after gaining 21.6%.
The two largest cryptocurrencies, Bitcoin and Ethereum, are also trading in the green, though their jumps have been less significant. Still, the market is showing positive momentum after a relatively sluggish December, likely because of Wednesday’s Fed meeting.
The US central bank hosted its final Federal Open Market Committee of the year yesterday, where it announced that it anticipates three interest rate hikes in 2022. The Fed Chair Jerome Powell also revealed that tapering would be accelerated to $30 billion a month, rather than the current $15 billion.
Tapering is a strategy central banks use to reduce the effects of quantitative easing. It focuses on interest rates and slowing asset purchases, topics that have been increasingly at the forefront of investors’ minds since the beginning of the COVID pandemic.
The Fed’s balance sheet has doubled from $4 trillion to $8 trillion since January 2020, with exuberant money printing acting as a catalyst for assets to soar in value. Stocks like Tesla (NASDAQ:TSLA) and Apple (NASDAQ:AAPL) have hit record highs over the last year, and crypto assets have also benefited from the unprecedented macroeconomic environment.
Many celebrated investors such as Paul Tudor Jones have sought refuge in Bitcoin as an inflationary hedge since March 2020. When data revealed that inflation was at a 31-year high in early November, the leading crypto asset rallied to $69,000 for the first time.
However, the market has looked shaky over the last few weeks. Fears over the Omicron variant have sent fear through global markets, with crypto struggling to post new highs since the new COVID strain was discovered. Many crypto assets have been trading sideways for weeks.
Investors are indicating that the outcome of the Fed meeting is bullish for crypto, but it’s not only digital assets that have surged. The Dow Jones Industrial Average has also risen over 200 points, while the NASDAQ Index is also up 2%.