Home CryptoCurrency News Bitcoin News How the FED's Announcement Will Affect the Price of Bitcoin (BTC)?

How the FED’s Announcement Will Affect the Price of Bitcoin (BTC)?

The US Federal Reserve (FED) has finally raised the much-expected interest rates and an aggressive policy to combat inflation and it will be interesting to see how this move affects the Bitcoin (BTC) and crypto market.

In a press release on Wednesday, March 16, the Federal Reserve’s chairman Jerome Powell announced that the Federal Open Market Committee (FOMC), the Fed’s monetary policy-setting committee, had lifted policy rates by a quarter percentage point, or 25 basis points. This is the first interest rate increase in more than three years by the Feb to control the spiraling inflation which is currently at the highest since 1982.

According to reports, this is not the only Feb interest rate hike for 2022. FOMC, which holds two-day meetings every year to set the monetary policy, has hinted at a further increase at each of the six remaining meetings this year, pointing to a consensus funds rate of 1.9% by year’s end. The committee sees three more hikes in 2023 then none in 2024.

How It Will Affect the Price of Bitcoin (BTC) and Cryptocurrencies?

FED Bitcoin

These higher rates could play out on stocks, cryptocurrency, commodities, as well as many other investments over the rest of this year and into 2023. Bitcoin and the crypto assets will remain in everyone’s eyes given the role they are playing in the current situations and their reputation as hedge against negative financial impacts..

Following the Fed announcement, Bitcoin (BTC) and Ether (ETH) rebounded shortly after the initial dip. BTC/USD pair started the day at around $40K and is now changing hands above $41,000. ETH/USD pair is 2.67% up in the last 24-hours to trade above $2750 at the time of writing. The overall crypto market has posted small gains following the news.

Bitcoin and cryptocurrencies have long been touted as a hedge against inflation low-interest rates, lack of purchasing power, devaluation of the dollar, and so on. However, some analysts believe that crypto assets will face headwinds from these rising interest rates. This is evident as the crypto market plunged from its ATH times in November 2021 when the Fed first signaled higher interest rates were soon on the way.

There are mixed remarks from the industry experts. The majority of them believe that these interest hikes will bring difficult times for every market, crypto will remain net positive in 2022 as any short declines driven by rate hikes will be offset by greater institutional and retail active trader adoption of this asset class.

The bottom line is that BTC prices will feel the pressure of tightening monetary policy but the expected institutional involvement in the sector can offset these effects as they will seek higher-risk assets to meet their returns. However, with the ongoing geopolitical crises and upcoming interest rates hikes, predicting anything for the remaining part of 2022 has become impossible.

Atiq Ur Rehman
Electronics Engineer with a passion to write about Disrupting Technologies like Blockchain. He joined Crypto-Economy in July 2019.
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