The rally of major cryptocurrencies along with the broader crypto market is slowing, if not completely shutting down. After a long observation, it was seen that equity and crypto markets were in tandem, the similar pattern witnessed this time again. Both the markets started to tumble and the reason remains the same as last year’s price fall—interest rate hikes of Federal Reserves.
For the whole of last year, the United States central bank aggressively increased interest rates in order to counter the possibility of looming inflation.
Interest rate hike results in decreasing the overspending after making it costly to borrow or lend. Following the halting of spending, markets get affected at first since the inventors pull off the liquidity leading to price drop. Even in these assets, volatile assets like cryptocurrencies face the efficacies.
Same could be seen amidst the possibility of the Fed raising the interest rates again. However, this is expected to be relatively softener than the previous ones. For context, the interest rate hikings during the previous year was about 75 basis points. It was when the bank started hiking which later slowed down to 50 basis points. The upcoming rate hike is likely to go even lesser with 25 basis points.
Last year, the interest rates were increased by seven times. The US dollar started being treated as the safe haven and investors moved towards it in bulk. On Monday, the US Dollar Index also reported to show an uptick of 0.32%.
Leading cryptocurrencies Bitcoin (BTC) and Ethereum (ETH) have been surging since the start of this year. In a month, both the crypto assets jumped up to 39% and 31% and reached 23,919 USD and 1,674 USD respectively.
Currently Bitcoin is trading at 22,923 USD after losing 0.63% while Ethereum at 1,575 USD after a 0.24% drop in the last 24 hours.
Meanwhile the popular memes coins Dogecoin (DOGE) and Shiba Inu (SHIB) remained in the green zone. DOGE is trading at 0.0924 USD with 7.6% and SHIB at 0.00001171 USD after 1.11% drop in a day.
Source: https://www.thecoinrepublic.com/2023/01/31/major-cryptocurrencies-sliding-amidst-fed-interest-rate-hike-announcement/