In the face of the Federal Reserve’s recent standstill on rate increments, cryptocurrencies remain seemingly unaffected, while the S&P 500 surges to a peak unseen in the past 13 months.

In the wake of the Federal Open Market Committee’s (FOMC) disclosure on June 14, the crypto market has seen turbulence. While the halt in rate increments does align with investor outlook, digital assets haven’t showcased bullish behavior. The Federal Reserve Chairman, Jerome Powell, alluded to the likelihood of further hikes down the line.

Bitcoin began the day with an optimistic price surge, surpassing $26,000. However, following the FOMC disclosure, it dipped to a 24-hour low of $25,791. Several market analysts, assessing the current trends, forecast a further descent to the $25,000 mark.

This lukewarm response in the crypto market may be due to the recent legal actions brought forth by the Securities and Exchange Commission (SEC) against Binance and Coinbase, two leading cryptocurrency exchanges.

Ripple Effects of FOMC on Crypto and Certain Stocks

Equity markets experienced a jolt post-FOMC decision, illustrated by the Dow Jones’ rapid 200-point decline. Conversely, the S&P 500 Index climbed to an apex unseen in over a year.

Despite the temporary halt on rate hikes, the Fed reiterated its intention to curb persistently high inflation rates.

In its policy announcement, the Federal Reserve suggested potential rate hikes in the future. It’s noticeable that movements in crypto prices often mirror that of the Dow and S&P 500. Even with a potential harsh economic downturn expected in the United States around 2023, the agreement on the U.S. debt ceiling has pushed major stock indexes to achieve new yearly highs.

According to a comprehensive analysis by U.S. Bank, the sentiment regarding the present economic climate is decidedly low. However, Robert Haworth, a senior investment strategy director at U.S. Bank, asserts that the U.S. economy may be slowing but isn’t plunging into a recession.

The decision to pause rate hikes has injected an element of volatility into both cryptocurrency and equity markets.

Regulatory Hurdles in the Crypto Sector Persist

Regulatory concerns continue to make headlines in the cryptocurrency world. As the European Union introduces a digital asset framework known as the Markets in Crypto-Assets law, the U.S. is adopting a regulatory approach by leveraging SEC enforcement.

In recent developments, the SEC has launched civil lawsuits which led to an expanded list of cryptocurrencies considered as securities, collectively valued at an astounding $100 billion.

This recent action by the SEC has triggered a protracted period of contention and skepticism surrounding the real-world applications of digital assets. It’s speculated that following the FTX debacle, U.S. lawmakers may hold a grudge against the crypto industry. The current debate focuses on how centralized exchanges (CEXs) should manage customer funds.

Nonetheless, not every lawmaker concurs with Gensler’s approach. Ohio Representative Warren Davidson proposed the “SEC Stabilization Act” to the House of Representatives on June 12, aiming to revoke Gensler’s chairmanship and redistribute the power among a committee.

Stagnancy in Crypto Liquidity and Volume

In the aftermath of the assault on CEXs, inflows and outflows from Bitcoin exchanges have increased. Inflows typically signify increased selling pressure, while outflows are usually associated with moving assets to self-custody.

Despite this on-chain self-custody movement, decentralized finance (DeFi) has yet to experience growth. As per DefiLlama, the Total Value Locked (TVL) across all protocols has declined by 0.5% in the previous 24 hours and has dropped by $120 billion since April 5, 2022.

Given the significant macroeconomic influences, forthcoming rate hikes, and low trading volumes, it’s likely that we’ll continue to observe substantial volatility in the crypto landscape for the foreseeable future.