The US Federal Reserve held a meeting earlier this week. On Wednesday, the US Fed announced that it would be raising interest rates in an effort to clean up its balance sheet. This announcement, as expected, caused volatility in the crypto market and also in the market for conventional assets.
During the pandemic, for the US Fed, providing a monetary stimulus to grow the economy was an inescapable imperative. The recent decision, however, to hike interest rates comes as the Fed is looking to ease up on the stimulus measures. The pandemic is easing and the requirement of the stimulus to support market growth is also at an end. The stimulus had caused the equities market as well as the crypto market to experience huge value gains.
US Fed’s Announcement – Effect on BTC
Expectedly, immediately following the announcement by the Fed that it was reversing the stimulus, BTC dropped sharply in value. However, some analysts are not convinced of the effect of the Fed’s announcement on the price of BTC. They believe that the fall is due to the low adoption rate by the buyers.
Analysts are basing their assessment on the belief that the derivatives market is dominated by short-positioned traders. They feel that the BTC market was largely affected by the spot market and not the derivatives market. This, in their opinion, is corroborated by the heavy bidding activity witnessed on Coinbase.
Analysts also opine that the present levels of prices are uncertain. They notice a bearish trend with regard to BTC options. Clearly, the mixed outlook expressed by traders indicates higher volatility in the near term.