Federal Reserve Meeting and High Inflation Makes Sizzle
Rancakmedia.com – Crypto investors are eagerly watching this week's Federal Reserve meeting, with markets anticipating the central bank to announce a sharp cut in the rate of bond purchases as US inflation soars.
In the face of macroeconomic uncertainty, Bitcoin BTCUSD, -0.40 percent has plunged more than 30 percent from an all-time high of $68.991 in November, recently trading around $47.565. Ether ETHUSD, -0.69 percent is down more than 20 percent from its record high of $4,865.6, trading recently at $3.834.
“With the Federal Reserve projected to accelerate its pace of easing its bond-buying program and implying faster rate hikes next year, crypto prices are likely to experience even greater volatility in the months ahead,” Jesse Cohen, senior analyst at Investing.com, wrote to MarketWatch via email.
After a period of rising interest rates, “investors tend to move away from riskier assets like cryptocurrencies and toward more stable investments like value stocks,” Cohen wrote.
Edward Moya, senior market analyst at Forex trading platform OANDA, repeats his argument. “The danger is if interest rate hike expectations grow too aggressive.
Wall Street may finally experience its long-awaited dip which will push markets into risk-off mode and punish the most profitable trades, namely cryptos,” Moya wrote in a Monday note.
Crypto Investors Respond to Federal Reserve Meeting
“Bitcoin should remain between the $42,000 and $52,000 levels ahead of Wednesday's FOMC decision and new forecasts,” according to Moya.
Bitcoin's rise over the last two years may be largely related to the popular notion that cryptocurrencies can be used as a hedge against inflation, although bitcoin has tended to move in line with the stock market recently, some experts say.
“The crypto market, in general, has seen some fantastic price increases due to its great appeal as a hedge against inflation,” Richard Snow, analyst at Forex DailyFX wrote by email.
In response to this, some investors argue that the Fed meeting may not be able to lead to further declines in the major cryptocurrency. Crypto exchange Eqonex's head of global sales and trading, Matt Blom, wrote of a quick rally for Bitcoin if the Fed surprises markets by delaying the pace of the decline.
“It might as well be argued that the Fed taper is fully priced, so barring any indication of an early rate hike, a rally is now the most likely outcome,” according to Blom.
Conclusion:
Crypto investors are watching the Federal Reserve meeting closely. The central bank is expected to announce a sharp reduction in the pace of bond purchases as US inflation rises.
Bitcoin's ascent may be largely related to the popular notion that cryptocurrencies can be used as a hedge against inflation. Some experts argue that the Fed meeting may not be able to lead to further declines in major cryptocurrencies.
