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What the Fed announcement could mean for the crypto market

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TL;DR

  • As it always has been, the FED report set for release today stands to affect crypto prices and trading volumes.
  • Crypto market analysts state that with better rates, the bull market is imminent.
  • What is the effect of global inflation on the digital asset industry? How long will the bear market last?

The Federal Open Markets Committee, popularly known as the Fed, has yet to announce its next policy rate on 20 September 2023. The Fed is expected to hold the interest rate steady as it evaluates the impact of previous interest hikes on the United States economy.

The committee is also expected to release new economic policies to boost the economy and lower unemployment. There seems to be a meeting of minds among the officials that holding the interest rates would be the best policy for the economy right now. However, few dissenting voices suggest that interest rates could hike once more in September.

Impact of the Feds announcement on the industry

The hike in July has steadily decreased inflation rates. However, the Fed states that the current rate is still above its target. The slowed-down inflation rates have given the Fed an opportunity to pause rate increases without a resurgence in inflation.

Suppose the Fed holds the interest rates steady. There is a likelihood that there will be a bull market for BTC, whose price is greatly influenced by the Fed’s policies and risk equities. When the credit conditions are favorable- when the interest rates are lower- BTC typically experiences a bull market, and the reverse is also true.

Bitcoin and Ether prices steadily rose before the announcement as the market looked forward to the Feds’ announcement of a no-increase policy in interest rates later today. Bitcoin saw a more than 1% increase, trading at $27,475 on Tuesday when buyers quickly emerged; this was the coin’s highest price in three weeks. This has, however, been the trend, with  $27,000  being the resistant mark. Ethereum, on the other hand, inched up marginally, nearing the $1,650 mark, making a 0.1% increase. 

Should the FED continue the hike rates?

Finance professor Jeremy Siegel stated that the Fed should not hike the interest rates again to avoid surging the unemployment levels in the country, only to squeeze out a small percent of inflation. He added that the economy is strong enough and may hold through for the rest of the year.

Bitcoin experienced a bull market from March 2020 to the first quarter of 2021 after the Fed lowered its interest rates to 0.25%, increasing the borrowing power of the average American and thus pumping up BTC as more traders had enough purchasing power. 

Crypto analysts and enthusiasts have expressed that the 0% increase rate hike could also mean a bull market for crypto.

The BTC 1% increase may also result from Japan’s leading bank announcement of launching a BTC-based fund designed for institutional investors, further incentivizing the market’s interest. The general market sentiment is ranging from neutral to bullish. 

Ethereum prices have stabilized even with the various events in the crypto market; the coin has had little change in its market price even after the Grayscale application for an Ethereum ETF to the SEC. 

Except for a few exceptions, all crypto assets were selling higher on Wednesday. For instance, XRP and Polygon gained more than two percent while Toncoin saw an increase of more than 3%. The industry’s global market cap was trading higher to $1.08 trillion.

The Fed seeks to defeat the spiraling inflation levels without causing harm to the economy by increasing interest rates. The last hike was in July, stabilizing inflation significantly, although there are still sentiments that the current rate is still above the 2% target. 

The much-anticipated announcement will impact the price of cryptocurrencies. BTC price is closely linked to the central bank’s policies, as when interest rates are favorable, the price is likely to go up and vice-versa. As forward-looking investors position themselves for the favorable announcement sparking a bull market, it is important to note that if the Fed announces another hike to try and attain its 2% target, the market would likely face a slump.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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