Benzinga - During Asian trading hours on Wednesday, Bitcoin (CRYPTO: BTC) reached a three-week low, dropping to $21,871, while Ethereum (CRYPTO: ETH), the second-largest cryptocurrency, nearly tested Tuesday's low of $1,535.
This drop was spurred by U.S. Federal Reserve Chair Jerome Powell's hawkish testimony to Congress, which led traders to price in a higher "terminal rate."
Powell's comments on Tuesday indicated the central bank is likely to raise rates more than previously expected, as the process of pushing inflation down to the 2% target still has a long way to go.
The Fed already raised rates by 450 basis points (bps) since last year, causing upheaval in risk assets, including cryptocurrencies.
These developments caused concern among investors and traders, who are keeping a close eye on the markets for any further changes.
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Speaking with Coindesk, Geo Chen, a macro trader and author of the well-known Substack-based newsletter Fidenza Macro, said the current situation suggests equities and crypto are not very vulnerable to a selloff anymore, given that there has already been a lot of derisking and deleveraging.
Chen's long-term bias is that risk assets will continue to trend higher once there is a return to a disinflation regime, although this may take a few months.
Chen's comments highlight the changing market dynamics, where the deleveraging and derisking efforts have likely already occurred, thus reducing the vulnerability of equities and cryptocurrencies to a selloff.
The prospect of a disinflation regime further supports his positive long-term bias towards risk assets.
Meanwhile, other major cryptocurrencies such as Dogecoin (CRYPTO: DOGE), Cardano (CRYPTO: ADA) and OKB (CRYPTO: OKB) were all trading down about 2%, while Binance (CRYPTO: BNB) and Ripple (CRYPTO: XRP) were trading in the green.
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