Crypto Market Tumbles After Fed’s September Meeting: Where Next?

The market is rife with uncertainty, after the FOMC announced a 75 basis point increase in the benchmark interest rate in the United States.

On September 21, the US Federal Reserve announced its fifth interest rate increase of 75 basis points. The rate, despite reaching the highest since 2008’s rate, did not fail to meet investors’ expectations.

However, investors continue to be nervous ahead of the next results after Fed Chair Jerome Powell warned that it would issue another rate hike to keep inflation down.

Fifth Interest Rate Hike

The crypto market’s reactions were favorable shortly after the Fed news. Analysts said that Bitcoin and Ether got minor gains of 2.2% and 2.7%, respectively. Bitcoin approached $20,000, before pumping back below $19,000.

The S&P 500 and tech-heavy Nasdaq showed an adverse reaction against the Fed’s issued interest increases with an initial drop before recovering in green.

Head of ETF Portfolio Management at Valkyrie Investments Bill Cannon stressed that more rate hikes are almost certain in the near term, which causes market uncertainty and headaches for investors.

It’s possible that we’ll see “another 75 basis point hike” at the November meeting, as the executive warned. The short-term effect on the crypto market, however, is unpredictable despite the fact that the result was in line with expectations.

Tracing back to the two latest rate hikes of 2022, the June news witnessed Bitcoin’s initial dump, and pump before reversing its substantial gains. The July news, on the other hand, led to Bitcoin’s price increase, according to data from CoinMarketCap.

Analysts are not bullish on Wednesday’s initial pop.

“Raising rates is negative for crypto because it means that it becomes more expensive to borrow because loan payments are larger, and so it entices people to save more, which is what central banks want to clamp down on persistently high inflation,” said Marcus Sotiriou, Market Analyst at GlobalBlock and advisor at Block Afrika.

The future of the crypto market is under threat after Powell sounded an alarm that it certainly was not the final point. To battle inflation, the Fed said that interest rates would be raised to 4.4% by the end of the year, before reaching a top of 4.6% in 2023.

The US central bank also altered its quarterly economic estimates, predicting that the world’s most powerful economy will contract in 2022 and achieve GDP growth of 0.2%, before increasing to 1.2% in 2023.

Meanwhile, inflation is expected to stay at a record high of 5.4% in 2022. The Fed anticipates that inflation will fall to roughly 2% by 2025.

Inflation is Hot

Global macroeconomic conditions are not expected to improve in the near future, especially after President Vladimir Putin revealed his plan to mobilize more troops and activate nuclear capabilities to defend territory. This severely threatens gas prices across the EU and may affect the global economic outlook.

Given all of the variables, the United States galloping inflation is on the edge of becoming unmanageable and entering hyperinflation. Faced with this, the US Federal Reserve was compelled to boost key interest rates abruptly.

Many expect the interest rate to remain unchanged during the November meeting.

The Fed is projected to hike interest rates by 0.75 basis points. However, uncertainty exists because it is dependent on CPI statistics. They may try to pull a Volcker.

As a result, the crypto market faces further decline. Increased interest rates may drive investors away from risky assets such as corporate equities, particularly cryptocurrency. Watch your back, and know that pain is part of the game.

Since The Merge on September 15, the price of Ether has dropped from $1,600 to less than $1,300. The same can be observed for Bitcoin, which has fallen from around 20,000 dollars to a several-week low of roughly 18,500 at the time of writing.