What the Fed's Latest Interest Rate Hike Means for the Crypto World

The US Federal Reserve's decision to raise interest rates by 75 basis points for the fourth consecutive time to fight inflation will have no impact on the crypto market -currencies, according to experts, who have pointed to market drivers, including Bitcoin BTC/USD and Ethereum ETH/USD, will be locked in a range unless there is institutional demand and clarity in the markets. regulations.

Although the Fed's hawkish monetary policy caused investors to flock to safe-haven assets such as the US dollar, which saw its value soar, it was expected that that the central bank will soon relax the pace of its tightening.

Despite the positive news, the broader indices saw a sell-off, with the Dow Jones, Nasdaq and S&P 500 trading up over 1.5%, 3.7% respectively % and 2.6%.

The cryptocurrency market reflects broader financial markets with Bitcoin down 1%, Ethereum down around 3.5%, Binance BNB/USD and Ripple XRP/USD down 1.3% and 2% respectively.

"Shark Tank" investor Kevin O'Leary told Benzinga that the crypto market has already priced in the rate hike and will remain limited to unless the regulations are clear.

"Fed rate hike means nothing for crypto valuations. It was already in the market. Cryptocurrencies, including Bitcoin, will remain constrained until we Let's get some clarification on the regulations The Stablecoins Transparency Act or one of the digital product bills could unlock value, but until then crypto is going to be stuck in a rut due to lack of institutional demand he said.

O'Leary will speak at Benzinga's Future of Crypto conference on December 7 in New York City.

Robert Johnson, CEO and President of Economic Index Associates, said the likelihood of rate hikes at the next three Fed meetings would certainly dampen enthusiasm for "highly speculative assets ".

"Higher rates are certainly a headwind for risky assets and crypto represents perhaps the highest risk of all risky assets. Crypto speculators have been supported by unprecedented quantitative easing undertaken in light of the coronavirus pandemic,” Johnson added.

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Guneet Kaur, a researcher specializing in digital currencies at the University of Stirling, said that in the future, the Fed rate hike will be a barrier to crypto assets, being given that the previous rises have caused the prices of Bitcoin and Ethereum to decline.

“Additionally, since the start of 2022, risky asset classes like stocks and crypto have been highly correlated, and a drop in one asset class will likely be followed by a drop in one asset class. other or vice versa. However, the adoption of cryptocurrency by active institutional and retail traders will balance out any short-term decline caused by rate increases. Thus, investors should find ways to use market volatility to their advantage instead of trying to time the market and exhibit herd behavior,” Kaur added.

Julius de Kempenaer, crypto expert and senior technical analyst at Stockcharts.com, said Bitcoin and other cryptocurrencies generally seem less sensitive to macro events like this rate hike.

"I don't see this changing in the future, which could help crypto/BTC de-correlate from traditional markets (equities/bonds), especially when those mar...