The cryptocurrency market reacted positively to the Fed rate hike

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Interest rates in the US have returned to pre-Covid-19 levels as the US Federal Reserve struggles to fight ever-escalating inflation.

The Fed continues to fight inflation with another 0.75% rate hike.

The US Federal Reserve announced this further increase in its meeting on Wednesday 27 July at the Federal Open Market Committee. Following this 75 basis point increase, US interest rates are now between 2.25% and 2.5%. These are the highest levels investors have seen since the start of the health crisis.

The Fed’s decision to raise interest rates again came shortly after the Bureau of Labor Statistics released its analysis of recent changes in the consumer price index.

Recall that the latter is intended to illustrate the average fluctuations in the prices of products consumed by households between two specific periods. Hence, according to the Bureau of Labor Statistics; the corresponding index reached an all-time high of 9.1% in June, an all-time high in almost 40 years, and this despite the Fed’s considerable efforts.

The latter have already raised interest rates several times to contain prices, but this has not had the desired effect, given the strength of the phenomenon. Worse still, it could be said that it has increased the risk of a recession. Additionally, the Bureau’s report notes that rising food prices, as well as housing and gasoline prices, are the three main drivers of this increase.

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According to a survey recently published by CNBC, an American television channel specializing in financial information. More than 96% of US citizens are concerned about the recent rise in gasoline, housing and food prices.

It should be noted that for US households, price increases in the latter category are of great concern. What’s more, this wave is already starting to change consumer habits, with shoppers now abandoning items they consider redundant to focus their spending on food and essentials.

To fight inflation, the Federal Reserve can create a mechanism to reduce the money supply, which it does by raising interest rates. The projected market rise of 75 basis points, although some analysts had predicted up to 100 basis points, makes borrowing more expensive.

Federal Reserve Chairman Jerome Powell said in a press conference following a meeting of the Federal Open Market Committee:

“Inflation has clearly surprised with its rise over the past year and there may be more surprises in sight.”

He added that while the pace of interest rate hikes may have slowed, the Fed would not hesitate to hike further if necessary.

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Cryptocurrencies on the rise

For its part, the cryptocurrency market has reacted positively to this increase in interest rates; Investors will notice The prices of Bitcoin (BTC) and Ethereum (ETH) increased by 6.79% and 9.85% respectively. At 11:50 am Bitcoin is trading at $ 22,527.59, Ethereum at $ 1,587.09.

Recently, the cryptocurrency market has been particularly related to American exchanges, in particular the Nasdaq, which grew by almost 4% on Wednesday.

In response, Anthony Trenchev, co-founder of the crypto wallet Nexo, said in a statement:

“The conclusion of Wednesday’s Fed meeting opens a bullish window with increased exposure to Bitcoin as we now have two months before policy administrators consider possible policy changes.”

Note that this rally attempt is however marked by Tesla’s announcement last week, the company explained. after selling nearly 75% of their bitcoin reserves.

Risk of loss of capital.

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