Bitcoin, Ethereum And Stocks Jump As A Result Of Latest Feds Rate Hike

The Federal Reserve announced today that it will continue with its aggressive monetary policy to fight inflation. Consequently, both crypto and traditional markets are reacting positively to the news. Bitcoin, the largest cryptocurrency, was trading at $20,650 at the time of writing, according to CoinGecko data. A modest 1% 24-hour increase. Meanwhile, Ethereum, the second-biggest cryptocurrency by market cap, was up 1.3%, priced at around $1,600. 

Bitcoin Claims On The News Of Rate Hike

On news of the Fed’s announcement, stocks also climbed. Wall Street trading was yesterday shaky on news that the labor market was strong. They also feared that the Fed would therefore continue to raise interest rates. 

The Federal Reserve today hiked interest rates by 75 basis points for the fourth consecutive time this year to combat inflation—currently at a 40-year high in the U.S. 

Although the Fed’s aggressive monetary policy has led investors to go to safe-havens like the U.S. dollar. However, it is expected the central bank may slow down the pace of its tightening soon, positive news. One which may have prevented a sell-off today. 

“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” today’s statement from the Fed said. 

The Bank of America stated what it expects in a Wednesday report. “the Chair to open the door to a slower pace of hikes beginning in December.” 

Its Not Just Inflation That Affects The Crypto Industry

Along with inflation, Russia’s invasion of Ukraine and Europe’s energy crisis has also led investors  to sell their stakes in equities. An aggressive Fed policy could hurt the crypto sphere, experts told Allin1bitcoins.

OANDA senior market analyst for the Americas Edward Moya made a statement. It went thus: “Digital assets are going to struggle here if the Fed stays hawkish with fighting inflation.”

“The economy is not weakening quickly enough to warrant a downshift with tightening that could weigh on cryptos. Bitcoin’s correlation with U.S. stocks remains intact and probably will continue until inflation significantly declines,” Moya said.

Bitcoin and Ethereum are still up 2.1% and 8.4% respectively in the past seven days. And Dogecoin, the original “meme coin” pumped by Elon Musk, is an outlier in the digital space. The coin is up 106% in the past week since the world’s richest man bought Twitter.  

Bitcoin Sell-off

Meanwhile, Bitcoin quickly followed stocks in a sell-off Wednesday-erasing modest gain. This happened after Federal Reserve Chairman Jerome Powell said the central bank might continue its aggressive monetary policy.

Things were looking bright for the largest cryptocurrency—at first. The Fed announced its expected interest rate hike of 75 basis points. Consequently, traders interpreted the news as perhaps the last time the Fed would do so. Bitcoin, Ethereum and the wider crypto market rose with stocks following the announcement. 

However,  Fed Chairman Jermone Powell made a statement shortly after in a press conference. He said that the central bank would keep upping interest rates until inflation was down-spooking Wall Street and crypto traders. 

Bitcoin at the time of writing had erased losses and was trading for $20,237 per coin, a 1% 24-hour dip. As reported in the beginning of this article, earlier today it had hit a high of $20,705. 

Ethereum, the second largest cryptocurrency by market cap, wasn’t doing much better either. It was down 2.5% in the past day, trading at $1,538.