The Federal Open Market Committee (FOMC) opted to hold interest rates constant at their present range of 5.25% to 5.5% at its fourth policy meeting of the year on June 12, therefore upsetting both conventional and cryptocurrency markets.
Bitcoin, Ether Shaken
This surprising consistency set off a strong reaction in the crypto market, with Ethereum’s price falling from $70,000 to $66,000 and Bitcoin’s price falling as well. The FOMC’s refusal to lower rates in spite of past signals of several cuts has heightened volatility and resulted in around $400 million in liquidations as well as general investor confidence loss.
Although the Federal Reserve Chair Jerome Powell underlined that although there has been “considerable progress” in reducing inflation, the central bank is not ready to relax its strict monetary policy Powell’s hawkish posture emphasises the Fed’s dedication to its 2% inflation target and implies that early rate cuts could compromise the current progress.
Ether down in the last 24 hours. Source: Coingecko
Crypto Markets Feel The FOMC Pinch
The crypto markets reacted immediately and dramatically to the FOMC’s decision and later Powell’s comments. After the disclosure, Bitcoin—which had skyrocketed to an astounding $70,500 on Tuesday—dropped to $67,220.
Ethereum descended from above $3,700 to $3,400 along a similar path. Apart from these two behemoths, cryptocurrencies like Cardano, Solana, and Ripple also suffered at least 8% drop.
BTCUSD trading at $67,411 on the 24-hour chart: TradingView.com
Following these swings, over the past two days around $400 million worth of crypto assets were sold. This tsunami of liquidations draws attention to the increased volatility and investor panic invading the market. Further aggravating the matter, US spot Bitcoin ETFs broke a 19-day run of nett inflows with nett outflows of $200 million.
Following the publication of the US Consumer Price Index (CPI) report—which revealed a year-over-year inflation rate of 3.3% for May, rather less than the expected 3.4%—the crypto market rapidly dropped back to its starting point. This response emphasises how consistently lacking investor confidence there is with continuous economic uncertainty.
Bitcoin plummets in the last week. Source: Coingecko
Global Economic Strategies Diverge
Other economic blocs are using alternative strategies while the US keeps a strong opposition against early rate cuts. Both struggling with their own inflationary pressures, the European Union and Canada have chosen to decrease rates this year. These varied approaches capture the different policy choices and economic situation across various areas.
A Grayscale-backed poll conducted back in the US shows that 41% of voters are focusing more on Bitcoin because of the nation’s continuous inflation. This growing curiosity in cryptocurrencies emphasises the public criticism of conventional economic policies and the search for new investment chances in a high-inflation climate.
Featured image from Kiplinger, chart from TradingView