Fed’s Interest Rate Hikes Attributed to Primary Catalyst of Crypto Bear Market
Brian Njuguna Sep 20, 2022 09:30
The decision by the federal reserve (Fed) to continuously hike interest rates to tame runaway inflation has been detrimental to the crypto market as bears continue to bite.
The decision by the federal reserve (Fed) to continuously hike interest rates to tame runaway inflation has been detrimental to the crypto market as bears continue to bite.
The situation has become dire to the extent that the crypto market is positively skewed towards the decisions made at the federal open market committee (FOMC) meetings, according to market analyst Michael van de Poppe.
“Crypto is heavily skewed towards the outcome of the FOMC meeting on Wednesday, while indices are acting relatively calm. What's the best case? 1) DCA and have a longer perspective. 2) Wait until FOMC is out. 3) Avoid leverage trading.”
Interest rate surges usually have bearish impacts on high-risk assets like Bitcoin (BTC). For instance, Bitcoin (BTC) sank to $18.5K on September 19 based on global monetary tightening concerns, Blockchain.News reported.
Speculations are high that the Fed will increase the interest rate by 75 basis points (bps) tomorrow, September 21, and this might further strain the crypto market.
Crypto reporter Colin Wu disclosed:
“On September 21, the Fed will announce its decision to raise interest rates, and the market is expected to raise interest rates by 75bps.”
With the Fed increasing the interest rate by 75 basis points (bps) in June, the highest since 1994, a similar fate was witnessed in July.
Mike McGlone, a senior Bloomberg Intelligence commodity strategist, noted that the Fed was using a sledgehammer on commodities and risk assets, resulting in bearish momentum.
Sam Bankman-Fried, the CEO of crypto exchange FTX, shared similar sentiments that despite the federal reserve being caught between a rock and a hard place, it was driving the current crypto downturn because both markets and people were scared, Blockchain.News reported.
Even though the two leading cryptocurrencies have gained some momentum in the last 24 hours, how the interest rate review will transpire this time round remains to be seen.
Bitcoin and Ethereum were up by 4.7% and 4.84% in the last 24 hours to hit $19,332 and $1,359, respectively during intraday trading, according to CoinMarketCap.
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