Crypto Market Plummets Post 0.50 Basis Points Interest Hike by Fed

• The Federal Reserve of the United States increased interest rates by 0.50 basis points.
• Just like U.S. equities, the majority of the crypto market fell shortly after the news.

The Federal Reserve authorized a lesser interest-rate boost than previous ones this year but indicated intentions to keep increasing rates next year to battle excessive inflation, sending the price of cryptocurrencies down along with U.S. markets.

Inflation in the United States is at a 40-year high, therefore the Federal Reserve has raised interest rates by 0.75 percentage points four times this year. 

Aggressive Monetary Policy Anticipated

The Federal Reserve of the United States increased interest rates by 0.50 basis points this time. This news reassured markets that the Fed may maintain its aggressive monetary policy in 2023, despite the lesser rate rise.

A statement from the central bank stated:

 “The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”

Bitcoin, the largest cryptocurrency by market cap, went to $17,649, a decrease of 3% in the hour after the news, according to statistics compiled by CMC. Since the collapse of the cryptocurrency exchange FTX on November 8, Bitcoin has been struggling to maintain a price of over $18,000. Those gains have been wiped out, but the price is still up over 3% from where it was a week ago.

Just like U.S. equities, the majority of the cryptocurrency market fell shortly after the news. At the same time, Dogecoin’s price fell 3.5%, while Ethereum’s fell to $1,288, a loss of 3%. Risk assets, such as tech stocks or Bitcoin, tend to see more price fluctuations than safer investments like U.S. treasuries or dollars, which explains why digital assets tend to track U.S. equities so closely.