How Will the Fed Rate Hike Affect the Cryptocurrency Market?


The cryptocurrency market made a sluggish start to the week. The price of Bitcoin (BTC) rose 0.2% in the last 24 hours to $39,000. Similarly, Ethereum's (ETH) price has spent the last 24 hours stagnating at $2,600. How will the Fed rate hike affect the cryptocurrency market?

According to the data released last week, inflation in the US has reached the highest level in the last 40 years. These statements by the US Federal Reserve (Fed) did not have a significant impact on the cryptocurrency market. Now the eyes turned to the decisions to be taken by the Fed on interest rates.

Some of the investors think that the Fed decisions may have a negative impact on some stocks in the cryptocurrency market and technology. However, some market commentators think that the Fed's rate hikes will not come as a surprise. Accordingly, they believe that the market has completed the current pricing in the previous period.

US sets record inflation

Inflation data released in the US last week showed the highest figures in the last 40 years. Total inflation was announced as 7.9. The energy sector was shown as the sector with the highest increase in the last month. US President Joe Biden attributed the increase in energy prices to the tension between Russia and the West.

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It is expected that the increase in the energy sector in the country will continue after the new decisions that the USA has started to implement in purchasing energy raw materials from Russia. The change in the size of the crisis that broke out between Russia and Ukraine is evaluated as the criterion that will affect the markets the most this week.

Cryptocurrency data provider Santiment shared a post about the Fed meeting on its official social media account. According to Santiment, the rate hike decisions to be announced by the Fed this week could seriously affect the Bitcoin and altcoin market. The platform argued this week that investors' preferences could shift both ways.

Fed rate decisions have had a negative impact on the cryptocurrency market for a while. The decrease in interest in risky investments with the prolongation of the pandemic period has negatively affected the volatile structure of the crypto money market. The market's exposure to global economic news has increased significantly over the past year.

Will the Fed rate increase affect the crypto market?

Some crypto experts think that if the Fed exceeds their expectations in interest rate hikes, the market will not be affected much. With the effect of the news since the beginning of the year, the price of BTC decreased from $48,000 to $38,000. Some investors are of the opinion that this decline includes the decisions the Fed will make throughout the year.

The first steps of the US crypto executive order caused relaxation in the market. The market experienced a short-term increase in value after the announcement and then settled on horizontal ground. The view that the USA's announcement of its goal of becoming the leading country in the field of cryptocurrencies and blockchain reduced the risk ratio of the market gained dominance.

What to expect from the Fed meeting?

The eyes in the market turned to the interest rate hike to be held at the Fed meeting. The expectation in the market points to a 25 basis rate increase. In the studies, almost all of the investors agreed that the rate hike would be announced in a range of 25-50 basis points.

With this decision, the Fed will continue the rate hike cycle. If the expectation of 25 basis points is not exceeded, this decision is not expected to affect the markets seriously.

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Fed Chairman Jerome Powell said in his assessment last week that the central bank is inclined to announce its decision to increase 25 basis points. After this comment, no significant movement was observed in the crypto money market. Some market commentators argue that the Fed rate hike will put upward pressure on the US 10-year bond yields and the dollar will continue to appreciate.

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