The Fed had increased the interest rates despite the fact that inflation sought a drop. It is expected that Fed will decrease the interest rates based on the future outcome. This has resulted in a drop in cryptocurrency prices.
Amid the crypto winter, the Crypto markets saw a dip once again soon after the FED released the minutes of the Meeting held in July. It was pointed out that the interest rate would still hike despite a drop in the inflation rate.
Bitcoin Markets Fell Following The Release Of Fed Minutes
The price of Bitcoin had fallen down by 0.9 percent an hour after the Fed made the announcement and later went down by 2.4 percent. Meanwhile, Ethereum was down by 2 percent on a daily chart and 0.9 percent on an hourly chart.
At the time of writing, Bitcoin’s (the world’s largest cryptocurrency) price was approximately USD 23,500, and Ethereum‘s was 1846 USD, As per the coin gecko data.
Also, a dip was observed in the stock market. The S&P 500 dropped by 0.2 percent, Nasdaq by 0.6 percent, and Dow Jones by 0.1 percent.
Key Points From Fed’s Minutes Of Meeting
- As per the minutes, the US Central bank Authority had said that despite the drop in the inflation rate, it was still high. The employment rate is quite low, and the labor market is quite strong. Also, there is no evidence that it would subside just like that.
- The minutes tell the participants found the inflation rate to be unacceptably high and quite above what the committee aims (2 percent drop). They had further added that they might slow down the rise in the interest rates, but it would be highly dependent on future data.
- The USA’s Inflation rate is quite high as compared to the past four decades. Various countries around the world would also get affected by the rising prices.
Various cryptocurrencies such as bitcoin and Ethereum are highly correlated with the US equities in 2022. Various Investors holding cryptocurrencies have decided to sell crypto along with “risky” asset classes such as tech stocks. Instead, they would prefer to hold the US dollars, and this has caused a rise in US dollar price, being the largest reserve fiat currency.
Outcomes From Fed Meeting
After the Meeting Fed raised the interest rate by 75 base points to the range between 2.25% and 2.5%. They have ditched what people had expected, and it is believed that it will be changed based on future data. Since then, there has been eventual liquidity easing and slower rate hikes in 2023, resulting in commodity prices declining. Last week, the Dow Jones showed a strengthening signal after the US had reported the drop in consumer price inflation.
Risk assets would experience a renewed volatility if the minutes moved against the dovish expectation. There might be a further price rejection which would help the USD as per the ING analysts. Bitcoin would still move in the opposite direction.