The long-awaited Fed rate hike is now over and, as expected, dealt a heavy blow to the broader cryptocurrency market on Wednesday.
The US Federal Reserve raised its policy rate by three-quarters of a percentage point, and extended it to a range of 3 to 3.25 percent.
That number represents a massive increase from March, when the federal funds rate was close to zero, and the subsequent increases represent the fastest shift in central bank policy since the 1980s.
The value of Bitcoin (BTC) fluctuated in the hours following the news, before dropping along with US stocks in the afternoon.
Bitcoin takes a beating, loses $19,000 handle
As of this writing, Bitcoin is trading at $18,730, down 1.5% in 24 hours, according to data from Coingecko. Recently, last week, the largest cryptocurrency was trading above $22,000.
Ethereum’s drop wasn’t that sharp, but it’s still below $50. After the Fed’s rate hike statement, rates fell more than 4 percent on both counts.
Bitcoin (BTC) price as the Federal Reserve announced its latest rate increase. Image: CoinGecko
Recently, the price of Ether was around $1,250, down 5.5% from the day before. The price of the second largest cryptocurrency by market cap has fallen since the merger last week.
Wider crypto market hates Fed rate hike
FOMC members have raised interest rates by 75 basis points three times in a row, indicating just how severe inflationary pressures are in America. The broader cryptocurrency market clearly hates it.
As inflation causes the Federal Reserve to raise interest rates, economic data related to inflation has been very important for the cryptocurrency market.
As a result, cryptocurrencies have recently responded poorly to the Fed’s rate hike report. For example, after the US Bureau of Labor Statistics reported inflation data for August, bitcoin prices fell 5% and ethereum prices fell 7% over the next 24 hours.
“We have to get inflation behind us,” Powell said in quotes to The New York Times during his post-meeting press conference. “I wish there was a painless way to do this, but there isn’t.”
Federal Reserve Chair Jerome Powell. Image: Getty Images
Powell’s words highlight the difficult situation of the central bank. Inflation has remained consistently high, and it is difficult to curb.
However, the extent to which crypto values could fall this year is still uncertain. Even in the absence of adverse news about inflation and Fed rate hikes, some experts believe that Bitcoin is still heading for a significant drop to the $10,000 region this year.
“I don’t expect cryptocurrencies, especially BTC and ETHThis is yet another reminder that “cryptocurrencies move at the whims of the Fed,” said Riadh Carey, research analyst at crypto data firm Kaiko.
Meanwhile, Michael Saylor, Chairman and Co-Founder of MicroStrategy, stated that Bitcoin could return to its November high of $68,990 “sometime in the next four years” and reach $500,000 in the following decade if it is worth The market is identical to gold.
BTC total market cap at $356 billion on the daily chart | Source: TradingView.com Featured image from The Crypto Basics, Chart: TradingView.com