Bitcoin Holds Steady at $20,000 Level as The Fed Hikes Rates as Expected

Wednesday’s U.S. Federal Reserve increase in benchmark interest rate was 75 basis points. It now ranges from 3.75% to 4.4%. This move was highly anticipated by market participants, including crypto traders.

This is the fourth consecutive Fed rate increase this year. It was designed to cool down the economy and combat record inflation.

Bitcoin took a quick 3% up swing, rising to $20,700 at 18:00 (UTC). The crypto lost 0.65% of its gains when Federal Reserve Chairman Jerome Powell made mixed statements in the press conference.

The Fed indicated that it is considering slowing down interest rate increases. Bitcoin surged almost 20% after the announcement. The central bank stated that it will consider the cumulative tightening and the lags in which monetary policy has an impact on economic activity and inflation when it decides rates next time.

But Bitcoin reversed its course when Powell said a more mixed message on the Fed’s plans: “We still have some ways to go,” and further, the Fed’s chair said, “incoming data … suggests that the ultimate level of interest rates will be higher than previously expected.”

Based on the comment made Wednesday afternoon, Bitcoin dropped below $20,200, just after it had almost reached $20,800 prior to the Fed rate hike. From $19,300 on Monday, the world’s most popular cryptocurrency is still up. Ethereum is now below $1,520, having dropped to $1,634 last weekend. ETH is still at or near its $1,340 level from the beginning of last Week.

The price movement in cryptocurrencies was similar to that seen in the stock market. The Dow Jones Industrial Average and S&P 500 dropped 1.5% and 2.4% Wednesday, respectively. The central bank still controls the equation, which reminded crypto traders about the strong correlation between equities and the Dow Jones Industrial Average. High inflation and rising interest rate have dampened the demand for risky assets.

It is possible that the flagship cryptocurrency’s value will fall below $20,000 and move back to the $19,000-$20,000 range where it has traded for the majority of the past two years.

Edward Moya, analyst at Oanda. commented On the market developments: “The initial Fed reaction to most risky assets was strong, but it wasn’t sustained as the central banking will still be dependent upon the next round in inflation data.”

Michael Safai is a partner in trading firm Dexterity Capital and said that “the devil wasn’t found in the data but was in the language.” Next week’s CPI report reaU.S. will be the focus of all eyes. [of U.S. inflation]. Crypto investors may pull back if the data isn’t as optimistic as the Fed’s ambitions.

The U.S. Fed Reserve FOMC Meeting will be held December 14-15. Market participants will assess whether Powell plans to slow down the rate of rate increases.

Source: Shutterstock



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