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See the Dangers of Fed Rate Hikes for Bitcoin and Other Cryptocurrencies



See the Dangers of Fed Rate Hikes for Bitcoin and Other Cryptocurrencies

After a robust meeting held on Wednesday, the Federal Open Market Committee (FOMC) disclosed the raising of interest by 75 basis points (0.75 percentage points) thereby marking the third consecutive hike this year with more possible dangerous consequences on Bitcoin and other digital currencies. 

The latest announcement by the FOMC underscores the gravity of the inflationary pressures currently hitting the US with resultant effects being expected on cryptocurrencies.

The decision will push the federal funds rate to a range of 3% to 3.25%, the highest since late 2007. The initial rate had been near zero for more than two years. Given the recent trajectories, more traders are envisaging that the federal funds rate will likely pass 4.25% before central bankers pause the hike.

Speaking on the development, Joe DiPasquale, the CEO of cryptocurrency hedge fund BitBull Capital, remarked that the decision of the Fed will compel the crypto market to test lower lows and stay put until the inflation figures begin to reduce. 

While Bitcoin (BTC) partly soared after the announcement, it was subsequently sold off later in the afternoon along with U.S. stocks. As of the time of filing this report, bitcoin was changing hands above $19000, per CoinMarketCap update.

See the Dangers of Fed Rate Hikes for Bitcoin and Other Cryptocurrencies

What’s Next for Digital Currencies

According to the Federal Reserve estimated rate hike report, it is projected that the rate hike will steadily increase through 2023. There is a tendency that the crypto market will be put at the bottom level until inflation comes down significantly.

The decision of the FOMC was influenced by last week’s August consumer price index (CP1) report, showing that inflation apart from energy and food prices has surged by 0.6% from the previous month. 

The status of the report underlines the fact that the Fed Reserve is still on top of the matter because a 1% hike would reveal that the country’s central bank has finally lost grip of the market and the possibility of a recession might be full-fledged. 

A crypto derivatives trading specialist, Joshua Lim, maintains that crypto performs in line with the decision of the Fed. And lower lows should be expected until the inflationary figures are relatively stable or reduced.