On Wednesday, the Federal Reserve implemented a well-anticipated interest rate hike, pushing benchmark borrowing rate from near zero in March 2022 to their highest level in over 22 years. The quarter percentage-point increase raised the Fed’s key lending rate to a range between 5.25% and 5.5%, as announced by the rate-setting Federal Open Market Committee (FOMC).
Following the rate hike, prominent figures from the crypto industry weighed in on its potential impact on the crypto market.
Ruslan Lienkha, Chief of Markets at YouHodler, expressed optimism, stating that Bitcoin had been experiencing an upward trend since the beginning of the year and was currently undergoing a mild correction.
Lienkha noted that the rate hike did not come as a surprise to traditional markets, and as a result, the crypto world was also likely to remain unaffected.
He highlighted the relatively low average daily price change of about 1% for Bitcoin over the last three weeks, indicating that active traders were shifting their focus to other tokens with higher volatility, such as Ripple, Litecoin, and Solana. On the other hand, long-term investors seemed committed to continuing their Bitcoin holdings.
Georgios Parfenidis, Risk Manager at Web3 FinTech platform YouHodler, observed that the rate hike had little immediate impact on cryptocurrencies, with US equities reacting positively. The July rate decision aligned with investor expectations, and the FOMC statement resembled that of the previous month, emphasizing a robust labor market, low unemployment, and persistently high inflation, which remained above the central bank’s 2% target.
Parfenidis cautioned that despite some relief from peak inflation rates, efforts to bring inflation down to the target level were ongoing. He also highlighted the possibility of another rate hike announcement at the upcoming September meeting, suggesting that any potential rate cuts might be delayed until the second quarter of 2024.
Shivam Thakral, CEO of BuyUcoin, emphasized that the crypto market’s immediate response to the Fed rate hike was undeterred, as major cryptocurrencies like Bitcoin showed resilience in the last 24 hours. However, Thakral warned that the long-term consequences of the rate hike might not be favorable for the crypto market. The interest rates reaching a 22-year high could negatively impact market liquidity.
Furthermore, he pointed out that the battle against inflation was expected to lead central banks worldwide to tighten monetary policies in the coming months, introducing macroeconomic factors and geopolitical uncertainty that could result in ongoing market volatility.
At the time of writing, Bitcoin was trading at $29,433.64, and Ethereum at $1,878.48, both showing positive movements despite the recent interest rate hike.
Overall, the Federal Reserve’s interest rate hike seemed to have a limited immediate impact on the crypto market, with major cryptocurrencies remaining resilient. However, uncertainties surrounding inflation, the potential for further rate hikes, and tightening monetary policies worldwide cast shadows on the market’s long-term outlook. As the crypto market navigates through evolving macroeconomic conditions, investors and traders are advised to remain cautious and monitor the situation closely.
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