The Fed’s Rate Increase Fails To Destabilize Bitcoin
The FOMC meeting was completed on Wednesday, and the Fed’s decision was finally made public. As anticipated, there was another increase in interest rates, but strangely, the cryptocurrency market did not react as anticipated.
Instead of dramatic volatility, digital assets in the area were able to maintain their gains over the last week, leading to speculation that the market had struck its bottom.
As risk assets, cryptocurrencies such as Bitcoin are subject to price declines when the Fed tightens monetary policy, and as this is the fourth straight 75 BPS rise, a greater sell-off was anticipated.
Rather, bitcoin has been able to hold its position over $20,000 and is now on a positive trend. There are reasons that have contributed to the cryptocurrency’s strong showing. All of these factors point to greater market gains.
The accumulation that has occurred on the market to date is one example. Large and small Bitcoin investors have accumulated BTC during the last two weeks. This has allowed the digital asset to provide $20,000 in much-needed help. Bitcoin has historically deviated from known tendencies such as strong market volatility after an FOMC meeting after it has reached its bottom. This may suggest a bottom for the digital asset.
This might also be due to the expectation that the Fed would eventually begin to ease its stance to combat inflation. In spite of inflation rates continuing over 8%, it is anticipated that interest rate rises will halt naturally within the next months.
Once this fall in interest rates starts, there will be a move towards bitcoin, which would indicate that the bottom is near, if not already struck. Bitcoin is not expected to go below its current cycle low of $17,600.
The dollar’s drop after the FOMC meeting may also indicate an impending bottom. As the dollar weakens, investors will rush to assets such as bitcoin in order to hedge and safeguard their buying power. Once this objective is achieved, a new bull market is expected to commence.