The United States rate hike mission in 2022 has dealt a huge blow to Bitcoin, Ethereum, and other major cryptos. Based on economists, it is meant to drain the system of liquidity, with high-growth technology stocks and cryptos leading the market losses.
Notably, the wider crypto market is majorly smothered in crimson, with the top crypto Bitcoin losing its grip on the integral $19,000 level, and trading at $18,872, down 6.5% in the past seven days.
The price of Bitcoin is 70% lower than its all-time high in late 2021. It has constantly failed to maintain its position above the $20,000 level. Ethereum, the world’s largest altcoin by market value, is trading at $1,325, losing around 16% of its value in the past seven days.
Following a strong warning from the United States Securities and Exchange Commission head Gary Gensler, the price of Ether has plunged heavily.
Crypto Market Gets Ready For Fed Rate Hike
For now, Bitcoin, Ethereum, and the crypto market, in general, are bracing for the central bank to hurl a huge “wrecking ball” that could also crush values as the Federal Reserve intensifies its continuing fight against inflation.
Caleb Tucker, the director of the portfolio strategy for Merit Financial Advisors in the Atlanta region, said:
“The stock and cryptocurrency markets are forward-looking, so the mere anticipation of increasing interest rates has had a big impact.”
As the Federal Reserve embarks on a 2-day policy meeting on Tuesday, all eyes are on the central bank, as it is majorly expected that the officials will raise the near-term interest rates by 0.75% after their meeting on Wednesday.
A senior international economist at Vanguard Group, Andrew Patterson, told Yahoo Finance Live:
“They’ve acknowledged for a while this will be a bumpy ride as they continue to bring inflation down.”
Based on data acquired from the digital asset price tracking site CoinMarketCap, the general value of the crypto market dropped by 6.3% to reach $908 billion.
Buy Bitcoin NowCorrelation Between Fed Rate Hike And Bitcoin
During its 2-day monetary policy meeting this week, the Fed might settle on a rate hike of 100 basis points, as opposed to 75 basis points, to deal with the surging inflation in the United States.
If that were to happen, it could become the most considerable increase in interest rates in more than 33 years since the Fed last raised rates by 100 basis points in February 1989.
Fed Chair Jerome Powell has insisted on maintaining high-interest rates to fight inflation, stating that the central bank does not want the Americans’ inflation expectations to continue rising and that history advises against prematurely easing policy.
In the meantime, after the March, May, and June meetings of the Fed, the price of Bitcoin plunged by over 10%. Although the drop following the July meeting was less severe, there is a considerable correlation between Fed rate hikes and crypto market depreciation.
