Following reports that the US Federal Reserve is considering increasing interest rates, the crypto market recorded significant losses with crypto assets such as bitcoin experiencing sudden drops in their prices.
A recent research report by digital asset investing firm Coinshares has however stated that bitcoin, at the end of it all, is likely to still profit from FED rate hikes despite a significant drop in its value of late.
FED Rate Hike to Suppress Inflation
According to the most recent minute of the meeting held by the U.S. Federal Open Market Committee (FOMC) in December last year, the federal reserve expressed serious concerns over the inflationary threat in the country.
As a solution, they considered implementing four interest rate hikes this year as a way to stimulate economic growth in the country and curb inflation.
FED’s Move to Favor Bitcoin
If the U.S.’s federal reserves go ahead to increase interest rates across the nation, the Coinshares report envisions that bitcoin will most likely benefit just the way other real assets have benefitted in the past, seeing that the leading cryptocurrency is being priced in U.S. dollars and has a fixed supply.
Mentioned in the report is Gold, whose value either appreciates (for example 25% increase in 1986) or remains flat during rate hikes, confirming that rising interest rates tend to either benefit Gold or have no negative effect on it.
The report also recalled the first rate hike to be witnessed by bitcoin in 2015 of which the cryptocurrency recorded a 51% rise in its value.
Although historical rate hike cycles are different from each other in some ways, significant similarities do exist.
What to Expect
These past few weeks have no doubt proved that bitcoin is extremely sensitive to the threat of interest rate hikes, having plunged even lower than half of its all-time high (ATH) of ($68K). There is, however, hope that when the interest rate is eventually increased, bitcoin will profit.
Moreover, the report predicted that there is a high risk of a FED policy error occurring (waiting too long and then raising interest rates too aggressively), with the USD then selling off, both of which are likely to be to bitcoin’s advantage.
Source: https://coinfomania.com/bitcoin-to-profit-from-fed-interest-rate-hike/#utm_source=rss&utm_medium=rss&utm_campaign=bitcoin-to-profit-from-fed-interest-rate-hike