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Fed raises rates by another 75 basis points – Crypto News Aktuell

The US Federal Reserve must continue the rising inflation fight.

The central theses

  • The Federal Reserve hiked rates another 75 basis points.
  • The federal funds rate is now between 3% and 3.25%.
  • With the Fed remaining committed to curbing inflation and crypto with no new narratives on the horizon, the market could suffer for some time to come.

The Fed’s latest rate hike comes after the latest CPI showed a higher-than-expected inflation rate of 8.3% in August.

The Fed announces another rate hike

The Federal Reserve has announced another rate hike of 75 basis points. The US Federal Reserve announced the rate hike last Wednesday at the Federal Open Market Committee. The rate hike follows four previous hikes of 75 basis points earlier this year, taking the Fed’s policy rate to between 3% and 3.25%.

Today’s move was widely expected, especially after rates arrived higher than expected on September 13th. The latest CPI data showed that inflation hit 8.3% in August, 20 basis points higher than the 8.1% estimate. Fed Chair Jerome Powell made it clear that the Federal Reserve was committed to raising interest rates in Jackson Hole last month as he warned of more “pain” for markets.

Global markets were rocked by the Fed’s actions throughout 2022. When Powell announced fresh rate hikes, markets panicked in both directions. While July’s rate hike prompted a move higher as the 75 basis point call was lower than initially feared, rate hikes typically hit risky assets as borrowing money becomes more expensive.

Crypto assets like and have traded in close correlation with traditional stocks after the Fed made previous interest rate changes. The crypto market has responded steadily; The whole market capitalization for cryptocurrencies up 1.6% in the last 24 hours, however Bitcoin and Ethereum are down 1.2% and 1.4% respectively on the day.

The Fed’s Influence on Crypto

Crypto assets have had a rough year since the market peaked at $3 trillion in November 2021. While the market was already exhausted after over a year of bullish price action late last year, the Fed has had a significant impact on the ongoing winter phase.

Per CoinGecko data, Bitcoin and Ethereum are currently over 70% off their highs, with many lower-cap assets faring even worse. Meanwhile, inflation is still at 8.3%. Inflation, while declining from 40-year highs recorded in June, is still well above the Fed’s 2% target.

Powell reiterated in Jackson Hole that the bank is targeting a 2% interest rate, suggesting it would remain hawkish for some time. If Powell stays on course, the Fed’s interest rate could rise further in the coming months, potentially shaking markets again.

The crypto market had been showing signs of a potential pickup over the summer, driven largely by anticipation of Bitcoin’s Ethereum landmark “merge” event. However, ETH took a nosedive as CPI pressure fell last week and then continued to plummet even after the merger was dispatched without issue. It’s down about 15% in the week since the update.

Bitcoin has also had a dismal performance in September, falling below $19,000 on multiple occasions. It suffered alongside Ethereum in the wake of the merger. Both assets are trading above their June lows when the market collapsed due to an industry-wide liquidity crisis caused by the collapse of the ecosystem. Bitcoin posted a record 11 weekly red candles, erasing its 2021 gains as it hit 18-month lows. Still, it’s unclear if the June chaos marked a bottom or if prices could fall further.

The crypto market is known for its cyclical nature, but narratives play a key role in the notoriously volatile space. Crypto is currently in a downtrend for almost a year, which historically suggests a recovery may be on the horizon. However, with more Fed rate hikes possible and no established narratives like the merger making the rounds, crypto hopefuls may have to wait before sentiment shifts and the trend reverses.

The global cryptocurrency market cap is currently $982 billion, down more than 67% from theirs all-time high is equivalent to.

Source: Crypto News Deutsch

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