Crypto Prices Bounces As Fed Agrees On 75 BPS Hike

[Coin_Gabbar]

The Federal Reserve has made a decision on the next interest rate hike.
The Federal Open Market Committee unanimously voted 12-0 to raise interest rates by 75 basis points.

Following the announcement of this Fed move, Bitcoin and Ethereum, along with the rest of the crypto market, dropped. However, since the hike is already priced in, the market has climbed subsequently.

The target interest rate is currently in the range of 300-325 basis points. The Fed also believes that further interest rate hikes will be prudent. The Consumer Price Index for August shows that inflation is still higher than expected.

How Fed Hike Will Affect Crypto

The Federal Reserve is responding to rising inflationary levels via interest rate hikes and quantitative tightening. Higher interest rates are unfavorable for the risk asset market. In June, an unusually significant boost of 75 basis points triggered a crypto market bloodbath.

However, this interest rate hike is probably not going to have the same impact. This hike might be quite similar to the one in July. Since a 75 basis point increase was already priced in, markets rallied after a brief decline.

Following the release of the August Consumer Price Index, which showed 8.3% year-on-year inflation, the markets priced in both a 75-bps and a more aggressive 100-bps raise. As the dollar strengthened, Bitcoin and Ethereum prices fell to new lows. As a result, a 75 basis point increase will not trigger a fresh selloff. Indeed, after falling a few points following the announcement, crypto prices have recovered.

What The Future Hold For Crypto

The cryptocurrency market is highly correlated with the broader stock market, making it vulnerable to macroeconomic factors. The Federal Reserve believes that future rate increases are probable. However, many think that the Fed's future monetary policy will be determined by the recession rather than inflation.

Other economic threats, such as global financial destabilization may force the Fed to soften its hawkish stance.

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