Crypto Spiral Halted as US Fed for the First Time in 28 Years
Categories: Crypto News US
The US Federal Reserve (Fed) has raised interest rates by 75 basis points since 1994, as part of an ongoing effort to tackle inflation. The biggest is the rate increase.Aggressive Rate Hike to Curb Inflation This past week saw crypto markets plummet in the face of US inflation hitting its highest level in 40 years. With a Federal Open Market Committee (FOMC) meeting scheduled for later in the week, commentators speculated that the record 8.6 percent inflation print would likely force the Fed to aggressively raise rates. And it turns out, they were correct. At a meeting of the FOMC, members took the decision to raise rates by 0.75 percent to 1.75 percent, with Fed chair Jerome Powell commenting. While there were references to soaring energy costs amid the Ukraine/Russia conflict and lockdown-induced supply chain woes out of China, no mention was made of the impact of a 50 percent increase in broad money supply since 2020. Going forward, FOMC members indicated a much stronger path of rate increases to help the Fed arrest inflation and achieve a 2 percent target which, according to its statement, it is “strongly committed” to. Crypto Market Rallies Briefly in Response Crypto markets arguably had a sense of impending doom going into June 15’s FOMC meeting, expecting the worst. Surprisingly, however, it looks like the bad news was already priced in as the digital asset market surged more than 10% on the news of the Fed's hiked rate.Ethereum rose from $1,075 to $1,240 against Bitcoin, seeing a rise of more than 10% from the low of $20,000 high to just above $22,500. However, the gains have been returned a touch, and bitcoin is currently exchanging hands at US$22,100.For all the talk of “uncorrelated assets” and a “supercycle”, 2022 has shown that the digital asset market is intrinsically tied to the broader macro environment. Conditions remain uncertain for now and, therefore, continued volatility ought to be anticipated.