Heavyweights Bitcoin and Ethereum bounced after the Federal Reserve’s second consecutive 75-basis-point interest-rate increase, which was in line with market expectations. Bitcoin jumped by almost 7% in the hour and a half following the announcement, while Ethereum rose 7.5%.
“Bitcoin is bouncing, but that follows what was a several-day pullback, so the bounce is not really impactful,” says Fairlead Strategies Managing Partner Katie Stockton. “It doesn’t show any significant turnaround momentum to the upside–it’s more of a one-day move that’s within the context of its pullback.”
BTC rose 7% following the Fed's interest rate increase.
TradingViewETH rose 7.5% following the Fed's interest rate increase.
TradingViewThe central bank’s fourth interest-rate increase of the year brought its target for the federal funds rate to a range of 2.25%-2.5% as it seeks to combat U.S. inflation, running at a 40-year high. Jerome Powell, who chairs the Fed, said another unusually large increase could be appropriate at the next meeting, which is scheduled for Sept. 20-21.
Rising interest rates boost returns on low-risk money-market instruments, which could correspondingly discourage investment in crypto. However, Stockton was cautious about making any quick judgments.
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“I wouldn't say we can rely on a one-for-one inverse correlation. Rather, we’re better served to watch the momentum and always make the assumption that the prevailing long-term trend will continue,” says Stockton. “Bitcoin is in a long-term downtrend–that would indicate a negative correlation, but it’s far from perfect.”
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