Bitcoin falls as Fed opts for restrictive rates
The Bitcoin price trend seems to move with the set interest rates of the US Federal Reserve. BTC plunged shortly after the Federal Reserve’s July meeting. But as of the minutes released on Wednesday, August 17, politicians had discussed more interest rate hikes to fight inflation.
They discussed the need to checkmate borrowing costs by increasing interest rates that could limit the country’s economic growth. That way, they can have the necessary time and influence to control potential inflation.
It is not surprising to see the recent performance of cryptocurrency following the news of the Fed’s plans. The assets are quite sensitive to such changes. For example, the market saw the crypto value halved when the central bank implemented its tightening cycle in March.
BTC price data knew a drop of around 2%. This decline was below the strong performance from the lows on both July 15th and July 26th. With the dramatic appearance of the bears in the BTC market, speculation is high on various platforms about a possible sell-off.
The crypto market has become more vulnerable to the possibility of a further increase in rates and restrictive US policies. As a result, there may be several spikes of volatility that can confuse the crypto market.
Furthermore, the move seems against the current market pricing and expectation of more cuts in interest rates in 2023. The price of BTC had also risen impressively to a two-month high above $25,200.
Reactions to food and rise in Bitcoin interest rates
A Decentral Park Capital researcher, Lewis Harland, noted that prices are moving to negatively impact Bitcoin. He mentioned that the Fed consistently manages inflation even as the costs drag down the economy.
Michael Kramer of Mott Capital Management also observed that there is no hope for Fed fund futures traders that central banks would move to rate cuts in 2023.
They expected that once the rate peaked at around 3.7% by March, it would stall until the end of 2023. However, the central bank raised interest rates by 75 basis points last month. It is now between 2.25% to 2.5%.
The price of Bitcoin is slightly on the rise today as it hovers around $23,500 against Wednesday’s low of $23,180. Despite the small gain, the value of BTC remains below the support level below its rising trend line.
There are reactions from observers who have come across the Fed minutes. For example, a former Fed trader, Joseph Wang, declared that it is hawkish.
In its observation, the transcript also expresses concerns about the implications of excessive austerity while managing inflation. But on the other hand, politicians also advised to create normality by slowing down the speed at certain levels.
Featured image from Pixabay, Charts from TradingView.com
