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Stablecoin regulation concerns reemerge; S&P500 futures drop ahead of Fed meeting this week

Stablecoin regulation concerns reemerge; S&P500 futures drop ahead of Fed meeting this week

Last updated 5th Aug 2022
Disclosure

Mounting caution surrounding the upcoming Federal Reserve meeting and a continuing. Bitcoin drop have impacted U.S. stock index futures. Crypto market uncertainty is fueled by speculation that the Fed might declare stablecoins pose a risk to the financial system, CoinDesk reported.

At the time of publication, Bitcoin is trading for $44,939.16. Solana, Cardano, and Ethereum have dropped by as much as 7% according to CoinDesk data.

Futures linked to the S&P 500 are changing hands at 1% less with similar losses in Japan and Hong Kong shares and European stock indexes.

Pankaj Balani, CEO of Delta Exchange, commented:

“Investors look to be taking risk off the table on fears that [a] crisis at China Evergrande Group may become a systemic problem to global markets. Markets will also be looking at the Fed commentary later this week to make sure that there are no changes in liquidity from the central bank.”

Early on September 20, Evergrande dropped by more than 10% in Hong Kong, a drop of 85% year-to-date. Major lenders have already been informed by Chinese authorities that the company is likely to miss payments.

All eyes on the Fed meeting

Investors will watch the two-day Fed meeting, which ends on Wednesday, very carefully to see if there will be any clarity on tentative plans to taper the liquidity-boosting stimulus program. Many members of the Reserve have called to start the taper as early as this year. Generally, digital asset prices might face selling pressure if it’s confirmed that tapering will begin in October or November.

Dollar rising ahead of event

In advance of the meeting, the US dollar is rising. According to experts, this signals a flight to safety. The dollar index reached a one-month peak of 93.34.

Stablecoin concerns

Concerns about impending regulatory action on stablecoins are exacerbating selling pressure around Bitcoin. Yesterday, The New York Times wrote that U.S. watchdogs were afraid of stablecoins becoming a source of volatility. Investors are worried that they might treated as securities or be declared a risk to the financial system.

Unprecedented market cap

According to Bloomberg, officials with the Financial Stability Oversight Council might launch a review of whether stablecoins are a threat to the economy. Over the past year, the total stablecoin market cap increased tenfold to $115 billion. Along with the expiry of quarterly Bitcoin options expected at the end of this week, these issues could keep the cryptocurrrency volatile.

Daniela Kirova

Daniela Kirova

Daniela is a writer at Bankless Times, covering the latest news on the cryptocurrency market and blockchain industry. She has over 15 years of experience as a writer, having ghostwritten for several online publications in the financial sector.