What the Fed’s Latest Rate Hike Means for the Crypto World – BNB (BNB/USD), Bitcoin (BTC/USD)
The US Federal Reserve’s decision to raise interest rates by 75 basis points for the fourth time in a row to combat inflation will have no impact on the cryptocurrency market, according to experts, who pointed to major market movements including Bitcoin BTC/USD and Ethereum ETH/USD will be stuck in a range unless there is institutional demand and clarity in the regulations.
Although the Fed’s hawkish monetary policy has sent investors flocking to safe-haven assets such as the US dollar, which has seen its value skyrocket, there were expectations that the central bank will soon ease the pace of tightening.
Despite the positive news, the broader indices witnessed a major sell-off with the Dow Jones, Nasdaq and S&P 500 trading down more than 1.5%, 3.7% and 2.6%, respectively.
The cryptocurrency market mirrored broader financial markets with Bitcoin down 1%, Ethereum trading down around 3.5%, Binance BNB/USD and Ripple XRP/USD down 1.3% and 2% respectively.
“Shark Tank” investor Kevin O’Leary told Benzinga that the crypto market had already factored in the rate hike and that it will remain range unless there is regulatory clarity.
“Fat interest rate hike means nothing for crypto. It was already in the market. Cryptocurrencies including Bitcoin will remain in range until we get regulatory clarity. The Stablecoin Transparency Act or any of the digital commodity bills could unlock value, but until then, crypto will to be stuck in a rut due to the lack of institutional demand, he said.
O’Leary will speak at Benzinga’s Future of Crypto conference on December 7 in New York City.
Robert Johnsonmanaging director and chairman of Economic Index Associates, said the likelihood of rate hikes at the next three Fed meetings would certainly dampen enthusiasm for the “highly speculative assets.”
“Higher prices are certainly a headwind for risk assets, and crypto represents perhaps the highest risk of all risk assets. Crypto speculators were bolstered by unprecedented quantitative easing in light of the coronavirus pandemic,” Johnson added.
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Guneet Kaur, a digital currency researcher at the University of Stirling said that in the future, higher Fed interest rates will be a barrier for cryptoassets, considering the previous increases caused Bitcoin and Ethereum’s prices to fall.
“Since the start of 2022, risky asset classes such as stocks and crypto have been highly correlated, and a fall in one asset class is likely to be followed by the other or vice versa. However, the cryptocurrency’s use by institutional and retail active traders will balance any short-term falls caused by interest rate hikes. So investors should find ways to use market volatility to their advantage instead of trying to time the market and exhibit herd behavior,” Kaur added.
Julius de Kempenaercrypto expert and senior technical analyst at Stockcharts.com, said Bitcoin and other cryptocurrencies generally seem less sensitive to macroeconomic events like this rate hike.
“I don’t see this changing going forward, which could help crypto/BTC decoupling from traditional markets (stocks/bonds), especially when those markets go through periods of weakness,” he said.
Bitcoin had a relatively large swing as an initial move after the announcement, but the market calmed down shortly after without showing a major change in its current market structure.
On the hourly chart, Bitcoin fell back again after the initial rally, but managed to hold above support levels near $20,000, but more importantly, $18,000.
“These levels are at the bottom of a trading range in which BTC has been moving since June. And the longer the 18,000 support area holds, the more important it becomes. Within this range, BTC could rise towards 21K and then 25K, and a strong positive divergence between price and the RSI supports such a move,” Kempenaer continued.
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