Crypto Market Tumbles After Fed’s September Meeting: Where Next?
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Markets are full of uncertainty after the FOMC announced a 75 basis point increase in the benchmark interest rate in the US.
On September 21, the US Federal Reserve announced its fifth rate hike of 75 basis points. Although the interest rate was at its highest level since 2008, it did not disappoint investors’ expectations.
However, investors remain nervous ahead of the next results after Fed Chairman Jerome Powell warned that it would raise interest rates again to curb inflation.
The fifth rate hike
Crypto market reactions were positive shortly after the Fed news. Analysts said Bitcoin and Ether posted small gains of 2.2 percent and 2.7 percent, respectively. Bitcoin approached $20,000 before falling below $19,000.
The S&P 500 and tech-heavy Nasdaq showed a negative reaction to Fed-issued rate hikes with an initial decline before recovering to the green.
Bill Cannon, head of ETF portfolio management at Valkyrie Investments, emphasized that rate hikes are almost certain in the near future, causing market uncertainty and headaches for investors.
It’s possible we’ll see “another 75 basis point hike” at the November meeting, as the manager warned. However, the short-term impact on the crypto market is unpredictable, despite the fact that the result was in line with expectations.
Based on the last two rate hikes in 2022, the June news saw Bitcoin’s first crash and pump before its substantial gains were reversed. The news in July, on the other hand, led to an increase in the price of Bitcoin, according to data from CoinMarketCap.
Analysts are not bullish on Wednesday’s first rise.
“Raising interest rates is negative for crypto because it means borrowing will become more expensive because the loan payments will be higher, thus it will entice people to save more, which is why central banks want to curb persistently high inflation.” said Marcus Sotiriou, Market Analyst at GlobalBlock and Advisor to Block Africa.
The future of the crypto market is under threat after Powell sounded the alarm that it was definitely not the last point. To combat inflation, the Fed said interest rates would be raised to 4.4 percent by the end of the year, before reaching a peak of 4.6 percent in 2023.
The U.S. Federal Reserve also revised its quarterly economic forecasts, predicting that the world’s most powerful economy will contract in 2022 and reach 0.2 percent GDP growth before picking up to 1.2 percent in 2023.
Meanwhile, inflation is expected to remain at a record high of 5.4 percent in 2022. The Fed expects inflation to fall to around 2 percent by 2025.
Inflation is hot
The global macroeconomic situation is not expected to improve in the near future, especially after President Vladimir Putin revealed his plans to mobilize more troops and activate nuclear assets to defend the region. This poses a serious threat to gas prices across the EU and may affect the global economic outlook.
Taking all variables into account, the US’s accelerating inflation is spiraling out of control and into hyperinflation. Because of this, the US central bank had to raise the key interest rates suddenly.
Many expect the interest rate to remain unchanged during the November meeting.
The Fed is expected to raise interest rates by 0.75 basis points. However, there is uncertainty because it is dependent on CPI statistics. They might try to pull a Volcker.
As a result, the crypto market continues to fall. Rising interest rates may drive investors away from risky assets such as corporate stocks, especially cryptocurrencies. Watch your back and know that pain is part of the game.
Since The Merge on September 15th, the price of Ether has dropped from $1,600 to below $1,300. The same goes for Bitcoin, which has fallen from around $20,000 to a multi-week low of around 18,500 at the time of writing.