Federal Reserve’s Tight Policy Sparks Crypto Market Volatility

Federal Reserve Governor Milan’s remarks on October 7 highlight declining neutral interest rates, urging policy adjustments to avoid economic risks, as reported by PANews.

Milan’s comments influence financial markets, with increased volatility and significant liquidations in BTC and ETH, reflecting the impact of monetary policy shifts.

Federal Reserve’s Impact on Crypto: $353M Liquidation in 24 Hours

Federal Reserve Governor Milan indicated that a decline in the neutral interest rate has resulted in a tighter policy framework. Milan suggested the necessity for policy adjustments to avoid economic damage. “I believe my neutral interest rate view is consistent with other Federal Reserve members. The Federal Reserve has ample room to cut interest rates, and the zero interest rate lower bound is still far away,” Milan remarked. If interest rates are not quickly reduced, Milan warns of potential adverse economic outcomes.

Immediate Implications of Milan’s statements include increased speculation on a potential rate cut. The cryptocurrency market reacted to these signals, causing a surge in volatility with $353 million liquidated globally, reflecting investors’ repositioning amidst the uncertainty.

Market Reactions showed Bitcoin experiencing $3.2 billion in inflows, potentially benefiting from a flight to stability within digital assets. Milan’s comments align with the view that current policies are more restrictive than neutral and demand reassessment to mitigate economic risks.

Policy Changes and Bitcoin: Historical Volatility Trends

Did you know? Historically, policy rate changes in the US have led to surges in Bitcoin volatility. Rate cuts typically benefit high-risk assets, but persistent macro uncertainty can still cause liquidations.

Bitcoin (BTC) trades at $122,345.72, influenced by recent Fed policy speculation. According to CoinMarketCap, BTC’s market cap stands at $2.44 trillion, with a daily volume of $72.33 billion. Despite a 2.33% daily loss, BTC maintains positive growth in both 7-day and 90-day metrics, reflecting overall market resilience.

Insights from the Coincu research team predict potential financial and regulatory shifts driven by new Fed policies. Historical trends suggest that repeated shifts often lead to heightened crypto market volatility, emphasizing the need for adaptative investor strategies. Investors must remain aware, as potential adjustments could reshape asset valuations significantly.