How volatile the market will be next week will be clear after the Fed’s rate hike. That’s because it announced another big rate hike next week to beat inflation. At its last meeting in July, the Fed increased interest rates by 0.75% for the fourth consecutive year since the beginning of the year. Bitcoin, gold and the traditional market have reacted differently each time.
How will another rate hike affect Bitcoin price?
If anything like the last four Fed meetings happens, crypto investors will be on another roller coaster next week. The charts show that the price of Bitcoin fell by at least 10% or more after the Fed meetings in March, May and June. The decline that followed the meeting in July was less severe. However, there is a clear pattern of Fed rate increases that corresponds to dips in the crypto market.
Here are those 4 charts
Bitcoin’s price briefly fell during the week of March 13, the same week as the Fed’s second meeting this year, before rising again. The Fed approved a 0.25 percent rate hike, the first increase since 2018.
Bitcoin’s price rose right after the Fed’s meeting on May 3 and 4. But then on May 6 it began to drop significantly.
Bitcoin’s price fell as low as $17,500 after the Fed’s two-day meeting on June 14 and 15. The Fed increased interest rates by 0.75%.
Historical data does not clearly indicate how markets will react in the future, especially in the volatile and unpredictable crypto market. However, it is a safe option for investors to expect new volatility next week after the Fed’s next expected rate hike announcement.
Why is the Fed rate decision effective?
Aggressive interest rate hikes are not positive for crypto prices. Experts say that the volatility will continue in the short term. Risky assets like stocks and crypto have been heavily choreographed since the start of 2022. Both acted together for months. As a result, if the stock market falls due to another interest rate hike, the crypto market will likely drop as well. At the same time, the opposite is also true.
The Fed’s rate hike in June was one of the many factors that rattled the crypto market, especially when it was in a “crypto winter” mode where prices were generally declining. According to Edward Moya, a senior market analyst at Oanda, investors are keeping a close eye on Bitcoin, Ethereum and the crypto market in general to see a “possible retest of the June lows.”
What it means for Bitcoin investors
According to analyst Alax Gailey, the Fed’s decisions should not change long-term crypto investment strategies. Despite the positive momentum last week, the market still isn’t close to the highs it reached last year. Bitcoin and Ethereum are still down more than 50% since November. Given the volatile history of cryptos, prices are just as likely to drop as they continue to drop. Also, it is extremely difficult to predict with certainty where they will go next. As you follow on Kriptokoin.com, BTC is trading at $19,439.66 at the time of writing.
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