The crypto market responded quickly – and predictably – to the Federal Reserve’s latest manque hike on Wednesday afternoon.
Bitcoin and Ethereum prices fell immediately after the Federal Reserve announced that it would raise interest rates by another 75 basis points. The cryptocurrency market was already in the middle of a tough week. On Monday, both coins are down more than 10% over the past week.
The cryptocurrency has been closely following macroeconomic events, and over the past year the market has reacted consistently negatively to price hikes. In a matter of minutes on Wednesday, the price of bitcoin fell from around $19,500 to $18,900. Ethereum saw a more moderate price drop, dropping by more than $50. Both declines inventaire to a decline of more than 3% following the Fed’s announcement.
After the préalable bounce right after those drops, bitcoin fell to around $18,800 and Ethereum dropped below $1,300 late Wednesday afternoon. But those declines were still relatively small compared to previous Fed manque increases. So what does it give? According to experts, it is a matter of market expectations.
“Everything is relative to expectations, not exactly what happens, but what happens to expectations,” said Joel Krueger, market strategist at LMAX Group, a London-based financial technology company that operates forex and cryptocurrency exchanges. “Except for some extreme price swings in the immediate aftermath, things went as expected.”
Here’s what investors need to know embout what’s happening with cryptocurrencies today.
How market forecasts are driving cryptocurrency prices right now
Experts expected the Federal Reserve to raise interest rates by 75 basis points. As these predictions came true, the cryptocurrency market hasn’t seen extreme price fluctuations today, at least nothing out of the ordinary. This is in contrast to July when the Fed announced a 75 basis inventaire increase (which was significant).
The Fed has remained consistent in its discours throughout this year. Fed Rose chair Jerome Powell shared the upbeat bienveillance – noting that more aggressive measures may be taken in the future – toward augmentation and further interest manque increases in late August. As such, Wednesday’s infos was completely in line with expectations, so the cryptocurrency market did not see much spéculation, experts say.
“It’s nothing more than a burger,” said Andy Mince, CEO of White Rock Direction, a Swiss-based binaire asset mining company. “There was a 10-20% veine of something more extreme, but that didn’t happen. Everyone expected 75 [basis points]And so you can see this afternoon that the downward pressure is relaxing a bit.”
We will continue to see a short-term percussion on crypto prices from Fed manque decisions and economic infos, Mince says, but those expectations were already largely priced in before the infos dropped.
Economic infos related to augmentation was particularly dédaigneux for the cryptocurrency market, as this is what is driving the Federal Reserve to raise interest rates in the United States. As such, crypto has been reacting negatively to augmentation reports lately. For example, cryptocurrency prices plummeted after the US Directoire of Labor Statistics released augmentation data for August, with Bitcoin dropping 4% and Ethereum 7% over the next 24 hours at that time.
This marks the fifth consecutive manque hike by the Federal Reserve. If augmentation does not abate, the Fed will likely become more aggressive and raise rates by higher numbers during their last two meetings of the year. This could lead to sharp drops in cryptocurrency prices, especially if they are not in line with market expectations.
With that said, the extent to which cryptocurrency prices will fall this year is still up for debate. Some experts maintain that Bitcoin is still poised for a massive drop in the $10,000 region this year, with or without bad infos from augmentation and the Federal Reserve.
Mince I don’t think we’ll see bitcoin hit 4 digits again, but a dip to around $13,000 may not be out of the tracas.
What should crypto investors do in the facette of augmentation and rising Fed rates?
Cryptocurrencies are just as évaporable as investments, and the current economic climate has led to their overcharging. With more price hikes on the perspective and the possibility of an upcoming recession, experts expect further price drops in the cryptocurrency market, although this effect may be short-lived if it is in line with market expectations.
As such, experts suggest that you stay on the path of your long-term investments – cryptocurrency or otherwise – and avoid selling when prices are dropping. You are likely to see a sharp decline in rates in the coming months, especially if augmentation does not improve after the fifth manque hike by the Federal Reserve.
“We just have to put up with the short-term fluctuations, and if you believe in the long-term, which I do, you can be optimistic embout the long-term,” Mince said.
Investment experts recommend allocating at most 5% of your écrin to crypto. In règlement, experts warn that you should only invest what you do not agree to lose, bicause cryptocurrency prices are notorious for sudden and menaçant declines.