important point

  • Federal Reserve Raises 25 bps, Bitcoin Falls Over 6%
  • However, price rebound continues as market bets on interest rates pull the line lower
  • Bitcoin initially fell to $26,700, now back to $27,700
  • Harsh monetary policy appears to be coming to an end, but this is exactly what Bitcoin investors want to hear
  • The flip side is that Bitcoin’s reputation may have been tarnished by last year’s industry turmoil.
  • Whether institutional investors and Wall Street capital will trust crypto again remains to be seen

As it has been for the last few years, Bitcoin It continues to fluctuate wildly based on interest rate expectations.

The orange coin rallied Wednesday against the backdrop of the latest FOMC meeting as interest rates hiked by 25 bps despite some analysts calling for a moratorium following recent weeks of bank turmoil. fell.

Why did bitcoin fall?

This was a turmoil in the banking markets, and the markets leading up to the meeting had priced in the true possibility of no more rate hikes.

The Silicon Valley Bank (SVB) sparked a crisis that spread to Europe last week before the spectacular collapse of Credit Suisse, a Swiss institution founded in 1856.

As is often the case when interest rates were rushed up as deposits fled banks and the market reverberated, things were getting worse. And this past cycle was the most rapid form of tightening in recent memory.

Bitcoin fell 6.3% from $28,500 to $26,700 as the Federal Reserve announced a 25 bps rate hike.

However, Bitcoin has since rebounded somewhat, trading at $27,600. This came as markets began to digest Fed Chairman Jerome Powell’s debate about the future course of interest rates.

The rate hike happened yesterday, but it is becoming increasingly certain that tight monetary policy is coming to an end. It’s worth remembering that before the SVB was decommissioned, this rate hike was effectively guaranteed to be 50 bps.

Also, with rate hikes by the end of July, the market is predicting rate cuts rather than hikes. So while the 25 bps rate hike may have been hawkish, the language and conference conclusions that followed were just the opposite.

Will Bitcoin go up?

The question everyone in the cryptocurrency industry is asking is what does this mean for the price of Bitcoin? As always, a difficult question to answer, but the coin’s future definitely looks brighter today than it did a few months ago.

Not only is it further removed from FTX scandal And while there was a wave of bankruptcies following the disastrous collapse of the former Tier 1 exchanges, the end seems to be near when it comes to tight monetary policy.

Since Bitcoin launched in 2009, the economy as a whole has never experienced anything but a ferocious bull market. The S&P 500 rose 7x from his GFC lows to highs, Bitcoin alongside tech stocks rode a wave of low interest rates, money printers warm and overall perfect weather .

However, this has completely reversed last year as inflation surged. With interest rates being aggressively increased, there was no way Bitcoin could maintain its previous level of buoyancy. Came down and came down

Finally, the tough monetary policy that has dragged it out appears to be coming to an end. And while this doesn’t guarantee anything, it certainly removes the shackles and at least it can happen.

Has Bitcoin’s image been damaged?

On the flip side of the argument, Bitcoin’s long-term trajectory has slowed and will likely never stay on the same trajectory, given the sheer size of its losses last year.

Crypto winters have come and gone in the past, but the most recent winter, as we said, coincided with a broader economic collapse for the first time in history. It also happened when it was an asset. This was not true in previous cycles.

Collapses like FTX, LUNA, and Celsius not only plundered capital from space, embarrassed Crypto on the big stage as unfair to the big players in the industry. Can Institutional Investors and Traditional Money Trust Cryptocurrencies Again?

This is an interesting discussion and time will tell.

By Jules

Leave a Reply