The Federal Open Market Committee (FOMC) is a committee that makes decisions that affect interest rates across the nation. The committee consists of twelve members: seven members from the Board of Governors, one president from the Federal Reserve Bank of New York, and four other Reserve Bank presidents. Its decisions have already impacted the markets in equities, cryptocurrencies, and commodities. Markets are expected to continue to feel the effects of higher interest rates for some time.
Bitcoin
The Crypto market is bracing for an escalation of volatility in the run up to the Federal Reserve’s FOMC meeting on Thursday. The Fed has been wrestling with stubbornly high inflation, and some expect it to increase interest rates by as much as a hundred basis points. Traders are scrambling to execute last-minute moves ahead of the meeting.
Markets are looking for guidance from Powell on how many rate hikes will occur by 2022 and terminal rate forecasts for the year 2019. The upcoming meeting is highly important to the market, but it also has the potential to impact Bitcoin’s price. The upcoming Fed meeting has a significant impact on the crypto market, and the price will follow the market reaction to the announcement.
During the last meeting, the Fed raised interest rates by 0.75 percentage points. The Fed cited the need to fight inflation, and stressed that the central bank is committed to continuing to raise rates. This would be the most significant increase in interest rates since the financial crisis. Inflation has soared to a record high this year. The recent hikes in interest rates were a setback for the Bitcoin market. As a result, the price of Bitcoin has fallen by ten percent.
XRP
A major event weighing on crypto prices is the FOMC meeting in Washington D.C., which will determine whether the Federal Reserve will raise interest rates for the third time in a row. The decision is expected to have a large impact on the risky class of assets. While there is a lot of uncertainty surrounding the event, experts say that choppy trading conditions will likely continue in the near term.
Despite the bearish market, Ripple (XRP) has performed surprisingly well, outpacing ETH and Tsuka in the last week. The cryptocurrency has gained over 50% and has surpassed the 100 million market cap mark. The gains have helped the currency surge, which now trades at just over $0.11. Despite the gains, ETH (ETH) and XRP (XRP) are still trading well below their pre-Merge prices. However, ETH has risen over 5% in the last 24 hours and has reached $1,350 for the first time in a few days.
XRP has soared since the meeting, surging 44% in just a week. However, Ripple has since filed an objection to the SEC’s statement, and the agency said it will seek additional time to review documents submitted to the meeting. Regardless, the crypto market has remained below its highs from late last year, and prices may drop even further.
Binance
Binance is currently facing scrutiny after a request by U.S. federal prosecutors to provide extensive records on its anti-money laundering checks. The request comes after a recent cryptocurrency crash that wiped out the savings of thousands of investors. While the SEC has yet to comment on the case, it is likely that Binance is being investigated for violating financial crime laws.
Binance’s CEO, “CZ”, reiterated his bullish stance about the crypto market. He said that despite the failure of a handful of projects, the utility of crypto is growing across the market. He also cited the example of the internet boom after the dot com bubble. Companies that survived the crash evolved into large organizations. He also noted that the price of Ethereum has risen above key psychological levels.
This is a significant event in the history of the crypto market. The Fed is expected to raise interest rates again in September 2022. The rise would be the biggest increase in more than three decades. However, Fed Chair Jerome Powell has stressed that the central bank does not want inflation expectations to rise too quickly. This could trigger a further decline in the price of crypto.
China’s enforcement of crypto
As the world’s largest economy faces uncertain times, China is taking a hard stance against digital rivals like bitcoin. The People’s Bank of China has announced that all cryptocurrency transactions, mining and overseas exchanges must cease operations in the country. The bank says the ban is needed to prevent risks associated with crypto trading and to safeguard national security and social stability.
This ban comes amid growing fears of money laundering and other forms of financial crime. It also cites the risk that cryptocurrencies are facilitating capital flight and bypassing conventional financial regulation. The move is part of a larger trend in the world toward greater state intervention. Many countries have passed laws requiring them to regulate their financial systems.
China’s enforcement of crypto markets is likely to continue. The new rules would hold exchanges and banks to stricter know-your-customer rules, while regulating Bitcoin exchanges would require banks to meet more anti-money laundering regulations.
Impact of interest rate hike on crypto markets
The recent hike in interest rates by the Federal Reserve has caused some uncertainty in the crypto markets. The move comes amid a bear market and stubbornly high inflation. The Fed has emphasized that it wants to maintain high interest rates in order to combat inflation and avoid a premature easing policy. The move has exacerbated the bear market in crypto, which was already in ‘crypto winter’ mode, and has already led to massive layoffs at several companies.
While the rise in interest rates will impact the overall economy, there are also certain factors that will have a positive or negative impact on crypto prices. The first factor is that it will encourage more people to save and invest. However, the impact on the crypto market isn’t as immediate as it is on the stock market. Several industry insiders have argued that it will take time for the crypto markets to recover. They believe that when rates start to come down, the digital assets will resume their upward trajectory. Until then, experts agree that there is a high likelihood that the market will remain choppily for a while.
On the other hand, the rise in interest rates has already affected stocks, commodities, and many other assets in 2022. The Fed has already increased rates three times this year. This spooked markets, and they sat up and listened. Then, the Fed tapered its bond-buying program and signaled that higher interest rates were soon to come. According to Raju, even though the market is facing headwinds from higher rates, they are likely to recover and experience an up year in 2022. The short declines induced by rate hikes will be more than offset by increased institutional and retail active trading.
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