Federal Reserve prepares to hike interest rates in March
Following the recent news from the US Federal Reserve, crypto-asset prices continued their downward trend during the morning trading session on January 27.
Cryptocurrency markets have lost another 3.3 per cent on the day, bringing their total market capitalisation to $1.70 trillion. Over the last 12 hours, the space has lost an extra $116 billion as the selloff continues.
The entire market capitalization has fallen to a six-month low, returning to levels last seen in early August. Since the start of 2022, crypto markets have decreased by 26%, equating to almost $600 billion leaving the field.
Bitcoin is leading the loss, down 4.4 percent to $35,776 according to CoinGecko, while Ethereum is down a similar amount, down to $2,371. At the time of writing, the remainder of the crypto market is a sea of red, with Solana, Terra, Polkadot, and Avalanche all suffering significant losses of 8-10 percent.
The sell-off was sparked by the Federal Reserve’s recent pronouncement. The US central bank said on January 26 that it would begin a series of interest rate rises in March.
These measures are part of a broader attempt to reverse pandemic-related policies that have resulted in excruciatingly high inflation rates. Inflation in America is presently at a four-decade high of 7% (far over the Federal Reserve’s objective of 2%), which is affecting consumers.
Interest rate hikes are one weapon the central bank may use to counteract this out-of-control inflation. According to sources, Fed Chair Jerome Powell said that “increasing the benchmark rate, which has been fixed at zero since March 2020, would assist in preventing high prices from being entrenched.”
Scott Minerd, worldwide Chief Investment Officer of Guggenheim Partners, remarked on the news: “The #Fed is attempting the impossible: not to shock the market while fighting #inflation aggressively.”
Gary Black, an SEC-registered financial advisor and managing partner of The Future Fund, believes the move was not inherently bearish:
“The Fed hinted that it would begin increasing interest rates “soon,” maintained the March end date for tapering, and made no mention of balance sheet timing. In summary, the Fed’s earlier messages remained unchanged. This is positive in light of the market’s massive year-to-date selloff.”
The stock market also suffers a setback.
However, it seems as if stock and cryptocurrency dealers are at odds. The news has also taken a toll on the world’s main indices.
According to MarketWatch, the S&P 500 sank 2.25 percent and the Nasdaq fell 3.75 percent. This morning, all major Asian stock exchanges are in the red.