Fed’s Interest Rate Hike Affects Cryptocurrencies and Stocks

cryptocurrency chart

On Wednesday, The US Federal Reserve increased the interest rate consecutively for the fourth time by 75 basis points, making it 4% from 3.75% to combat inflation. This hawkish monetary policy of the Fed has impacted not only the stocks but also the prices of cryptocurrencies like Bitcoin, Ether, etc., to some extent.

The value of Bitcoin is down by 1.3% at around $20,200 after the announcement, which is further expected to go below to settle in the range of $19,000-$20,000.

The second largest cryptocurrency, Ether, also saw a price downfall of 4% to settle down at around $1550 after this announcement. According to Coindesk analyst Glenn Williams, this crypto winter is giving bullish investors a great opportunity to collect these major crypto at a favorable cost. However, long-term investors are still exploring this opportunity.

Apart from Bitcoin and Ether, the popular crypto altcoin called Dogecoin has also dropped steeply by almost 10%. At the same time, the market index of Coindesk witnessed a downfall of 2%. The only exception was the CRO which raised by more than 6.7% after this announcement.

The effect of the Fed interest rate hike was also visibly witnessed in major equity markets, facing a steep drop in their stocks. The popular tech stock Nasdaq fall off by 3.3%, S&P 500 by 2.5% and Dow Jones Industrial Average by 1.5%. The safe-haven gold also witnessed a price drop of 0.7% afterward.

With this fourth consecutive interest rate hike, the Federal is trying to bring down the highest inflation rate to 2% in the last four decades. But with the current inflation price of 8.1%, the central bank soon has to make some strong and harsh strategy to reverse it back to the aimed 2%, which is making all the investors concerned.

According to experts, it could also be scary as the value of the USD could weaken against the other currencies. The strong value of the USD over other currencies is currently the major reason why the US is witnessing lower inflation than other countries.

Although the inflation rate has slowed down this year in recent months in the US, the constant monthly rising is leaving the Fed with no option but to work strictly on tightening monetary policy. While the officials are trying to combat the continuous rising inflation in the US, investors’ pain is increasing significantly with the dropping prices of crypto and stocks.

Also Read: Crypto Exchange Deribit Paused Withdrawals After Losing $28Million in a Hot Wallet Hack

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