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09/01 09:01

How Do Fed Rate Hikes Affect Crypto Prices?

Hi I'm Jackson. I saw a piece of news that I think is very valuable. I just want to share it with you.
The Fed is essentially aiming to slow inflation by slowing down the economy. While the result should slow down rising prices, the slower economy also eats into corporate profits and investor sentiment.
And that negative sentiment doesn’t stop at Wall Street’s doors. It bleeds into the crypto market as risk aversion grows to match a worsening economy. It’s not a direct relationship, but we’ve seen this pattern play out for the last couple of months.
Bitcoin’s price dipped as low as $17,500 following the Fed’s June meeting when the central bank hiked the federal funds rates by a significant 0.75 percentage points.
“You can see the impact of rising interest rates on the NASDAQ, and cryptocurrencies have proven to be closely correlated with high growth tech stocks,” according to emailed statements from market analysts at Bitfinex, a cryptocurrency exchange based in Hong Kong.
“So, the cryptocurrency market has manifestly been hit directly by recent rate hikes from the Fed, and, like other so-called risk assets, is highly sensitive to utterances from the Fed.”
Though the prices of bitcoin and ethereum — along with the stock market — have seen small rallies in recent weeks, crypto expert and educator Wendy O says the rate hikes and broader economic uncertainty could still contribute to an extended bear market. “In previous bear cycles, both cryptos have corrected 85%,” O told us recently. “I anticipate bitcoin to hit $10,000 and ethereum to hit $750.” 

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