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Fed rate hike

Fed Rate Hike: Cryptos Hammered As Central Bank Pumps Interest Rates By 0.75 Points

Christian Encila
by Christian Encila
2 years ago
·
Posted in Bitcoin, Fed Rate Hike
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

The much-anticipated Fed rate hike is now out and, as expected, dealt a heavy blow to the broader crypto market on Wednesday.

The U.S. Federal Reserve increased its policy interest rate by three-quarters of a percentage point, extending it to a range of 3 to 3.25 percent.

This number represents a huge increase from March, when the federal funds rate was near zero, and the subsequent increases represent the central bank’s quickest policy shift since the 1980s.

Bitcoin (BTC) fluctuated in value in the hours following the news, before falling in tandem with U.S. stocks in the afternoon.

Related Reading: Microstrategy Bitcoin Bet Loss Grows To $1.5 Billion, Stocks Down After $6 Million BTC Buy

Bitcoin Takes A Beating, Loses $19,000 Handle

As of this writing, Bitcoin is trading at $18,730, down 1.5% in the 24 hours, data from Coingecko show. As recently as last week, the largest cryptocurrency had traded above $22,000.

Ethereum’s decline was not as severe, but still more than $50 lower. After the Fed rate hike’s statement, prices fell by more than 4 percent in both cases.

Bitcoin (BTC) price as the Federal Reserve announced its latest rate increase. Image: CoinGecko

Recently, the price of Ether was approximately $1,250, a 5.5% decrease from the previous day. The price of the second-largest cryptocurrency by market capitalization has been falling since last week’s Merge.

Related Reading: Fed Rate Hike: Huge ‘Wrecking Ball’ About To Slam Into Bitcoin, Other Crypto

Broader Crypto Market Hates Fed Rate Hike 

Members of the Federal Open Market Committee (FOMC) have hiked interest rates by 75 basis points three times in a row, indicating how severe inflationary pressures have become in America. Clearly, the broader cryptocurrency market dislikes it.

Since inflation is causing the Fed to raise interest rates, inflation-related economic data has been very significant for the cryptocurrency market.

As a result, cryptocurrencies have recently responded badly to the Fed rate hike report. For instance, after the U.S. Bureau of Labor Statistics reported August inflation data, Bitcoin prices fell 5% and Ethereum prices plunged 7% over the subsequent 24 hours.

“We have got to get inflation behind us,” Powell said in quotes by The New York Times during his post-meeting news conference. “I wish there were a painless way to do that, but there isn’t.”

Federal Reserve Chair Jerome Powell. Image: Getty Images

Powell’s words highlight a difficult situation for the central bank. The inflation rate has remained persistently high, and it is proving tough to rein it in.

However, the extent to which crypto values can fall this year is still uncertain. Even in the absence of adverse news from inflation and the Fed rate hike, some experts believe Bitcoin is still headed for a big decline to the $10,000 region this year.

“I don’t foresee crypto, especially BTC and ETH, bucking the Fed’s influence any time soon,” Riyad Carey, a research analyst at crypto data firm Kaiko, said, adding this is yet another reminder that “crypto moves at the whims of the Fed.”

Meanwhile, Michael Saylor, chairman and co-founder of MicroStrategy, stated that Bitcoin might return to its November high of $68,990 “sometime in the next four years” and reach $500,000 in the following decade if its market capitalization matches that of gold.

BTC total market cap at $356 billion on the daily chart | Source: TradingView.com

Featured image from The Crypto Basics, Chart: TradingView.com
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Christian Encila

Christian Encila

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Christian, a journalist and editor with leadership roles in Philippine and Canadian media, is fueled by his love for writing and cryptocurrency. Off-screen, he's a cook and cinephile who's constantly intrigued by the size of the universe.

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