The announcement sent crypto markets scrambling. Initially, the cryptocurrencies saw gains but then came the fall. The tech-heavy Nasdaq and S&P500 also took falls, before rallying slightly back.
Bitcoin is currently trading at $18,678, as per data from CoinMarketCap. It lost 1.71% of its value in the last 24 hours. Ethereum is down by 5.79% and is changing hands at $1,262. The second-most popular cryptocurrency is struggling to make gains ever since the historic Merge.
Bill Cannon, head of portfolio management at Valkyrie Investments, said for investors uncertainty still means more rate hikes in the near term. Another 75 bps hike is likely at the next FOMC to meet in early November. Marcus Sotiriou, the analyst at GlobalBlock, believes raising rates is negative for crypto because it becomes more expensive to borrow as loan payments are larger. It prompts people to save more and this is what central banks want to clamp down on persistently high inflation. Sotirious says any rally in the short term will be unwelcomed by the Federal Reserve. People may feel wealthier and more likely to spend, thus contributing to more inflation (wealth effect). Fed Chair Jerome Powell said the central bank hopes to lower inflation to 2% from its current, near four-decade high of over 8%. He highlighted that the FOMC is strongly resolved to bring inflation down to 2%. The Feds will continue to keep at it until its target is achieved.
Edward Moya, OANDA senior market analyst, said it’s a troubling market environment. He thinks for the most part much of Wall Street is expecting the Fed to remain committed to fighting inflation which is difficult for risky assets, like crypto. Moya pointed out that it’s a wait-and-see approach, wherein long-term investors are still committed to crypto and the Fed’s decision will not deter them. They believe that crypto will eventually trade on its own fundamentals, not like tech stocks.