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Crypto Markets Remain Glued to Federal Reserve Policy Announcements
Friday, June 14, 2024 5:57 am
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In a long-awaited move, the Federal Reserve’s policy committee, known as the Federal Open Market Committee (FOMC), decided to keep interest rates stable at its recent meeting.
Each day, Coinrule will walk through the state of the digital asset market from Blockbeat, your home for blockchain and digital asset news, analysis, opinions and commentary.
In a long-awaited move, the Federal Reserve’s policy committee, known as the Federal Open Market Committee (FOMC), decided to keep interest rates stable at its recent meeting. This decision comes in a context of continued concerns about inflation, but the most recent figures show signs of a slowdown. As a result, markets, including cryptocurrencies, are preparing for change.
The FOMC is a key player in setting US monetary policy. It meets regularly to decide on interest rates, with the aim of balancing job growth with stable prices. At the last meeting held on June 12, 2024, the committee kept the target interest rate unchanged at between 5.25% and 5.50%. This decision, although expected, was taken with an eye on inflation trends. Recent data showed that inflation rose 3.3% last year, with a small increase of 0.2% in May. This was enough to calm markets and raise hopes of possible rate cuts that are scheduled for the end of the year.
Cryptocurrencies have had a difficult relationship with the Fed’s policies. When the Fed began aggressively raising interest rates in 2021 to control inflation, the crypto market witnessed a severe downturn. Higher interest rates make borrowing more expensive, leading investors to abandon risky assets like Bitcoin and Ethereum. However, the recent pause in rate hikes has brought a breath of fresh air. Following the latest CPI report, which suggested a cooling in inflation, Bitcoin and Ethereum rose around 4%, with Bitcoin briefly touching the $70,000 mark before falling slightly lower. Traditional markets also reacted to this event with the S&P 500 and Nasdaq Composite indexes rising around 1% and 2%, respectively, after the announcement.
Looking ahead, the crypto market is at a critical point. The Fed’s firmness on interest rates suggests a period of potential volatility. With CPI numbers suggesting a reduction in inflation, there is speculation about a rate cut in the near future. This could introduce fluctuations in cryptocurrency prices. Interestingly, most of the recent cryptocurrency price drops have already eliminated negative liquidity, meaning there is less pressure on prices to fall. This shifts the focus to the upside, suggesting that the market could see more upward movement if volatility kicks in.
But despite these short-term possibilities, the medium-term outlook for cryptocurrencies remains uncertain. The market may continue to trade sideways, waiting for a new trigger to set the direction. The Ethereum ETF is a candidate to keep in mind as a catalyst for significant upward movement. The approval of this asset could potentially funnel billions of dollars into the Ethereum blockchain. This wouldn’t just be a game changer for ETH, as it could also represent an opportunity for a significant altcoin rally.
Ultimately, the Fed’s current position offers a moment of calm, but leaves the door open for more violent fluctuations. As the Fed balances inflation control with economic growth, cryptocurrency investors should remain alert, ready for a market that could swing in either direction, influenced by traditional financial policies and the unique dynamics of digital assets.
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