Federal Reserve plans to raise interest rates push traders to sell cryptocurrency

Bitcoin It collapsed again, temporarily dropping below $20,200 earlier today, as terrified traders frantically sold the cryptocurrency before the US Federal Reserve did something it hasn’t done in 28 years – raise interest rates by three-quarters of a percentage point. .

In response to rising inflation and volatile financial markets, The central bank will raise the interest rate That banks charge each other for overnight borrowing in the range of 1.5%-1.75%.

BTC and ETH are down to trade at just over $20,000 and $1,000, respectively, as selling continues across the broader crypto markets. This means that the total locked value (TVL) of tokens across all blockchains has fallen by more than 8% in the past 24 hours.

Michael MorschCEO, Crypto/Digital Hedge Fund 36 . paperclosely follows price movements, he says, “bitThe coin has already been caught in the crossfire in the past few days. There is still a large gap between nominal and real rates, so there is much more room for the Fed and other central banks to raise in the coming months. Investors cannot realistically expect risky assets to have a more sustainable uptrend until the Fed pivots.

In addition, some parts of the broader crypto ecosystem face somewhat difficult computation. When the reality of a bear market begins to set in, the hidden leverages and structural weaknesses of projects that only succeeded when prices have risen finally emerge. In the long term, coins with strong use cases and utilities will persist – as they did in previous bear markets. But some companies in this field have unsustainable business models and now present a risk of contagion.

So bitcoin has taken a double whammy and we are likely to see prices below $20,000 soon. Some are calling for $12,000 – and while that could happen, we believe that price has a relatively low probability at the moment. Today, everything is in the hands of the Federal Reserve. A 75 basis point rate hike would probably take us to $16-18K. On the other hand, a 50 basis point hike in interest rates could trigger a significant bounce – likely to reach the $24,000 resistance levels. “

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