Bitcoin and every top-20 crypto is trading in the red ahead of pending interest rate hikes

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On Wednesday this week, the Federal Reserve is widely expected to announce plans to raise short-term interest rates by another 0.75%.

Important points

• A busy week for financial data coming as 170 companies report second quarter earnings; The Fed is likely to raise interest rates to cool inflation; and we should know if the US is headed for a recession when productivity data is released on Thursday.
• Investors appear to be abandoning risky investments like crypto, as the entire cryptocurrency market is down 4.5% and every top-20 crypto is down over the past 24-hour stretch according to CoinMarketCap.

At press time, the valuation of the broader crypto market is down more than 4.5%, while every top-20 crypto has also traded in the red over the past 24 hours across cryptocurrency exchanges, according to CoinMarketCap. The largest and most popular cryptocurrency, Bitcoin, follows suit as it also trades lower in the 4%-5% range, while the US stock market rose a fraction on the day according to Yahoo! Finance.

Current Fed action may not be enough

Last month, the year-on-year inflation rate hit another 40-year high – marking 13 consecutive months of inflation above 5%. Those numbers forced the Fed in June to announce a 0.75% increase in short-term interest rates to try to cool red-hot inflation. At the same June meeting, Fed Chair Jerome Powell hinted at the possibility of another 0.75% increase at the central bank’s July meeting, which takes place this Tuesday and Wednesday.

Assuming the Fed raises rates another 0.75%, that would push the cost of borrowing money by 2.25% – 2.50%, but it’s not clear if that’s enough to slow rising inflation when you consider that June- the figure rose to 9.1%. In fact, former Fed Chair Ben Bernanke recently criticized the current Fed leadership, stating that they should have reacted last year when inflation started to rise in April 2021. We’ll see what happens on Wednesday, but the Fed’s current plan of attack appears to be too a little too late. Unfortunately, the average consumer is paying for the monetary policy mishap—literally—as they pay higher prices at gas pumps, grocery stores, and virtually everywhere else.