Crypto masses have been relishing the relief pump by BTC followed by the announcement stating a 0.75% rate hike in interests.
The cryptocurrency market that has been showing a bearish trend for the past couple of weeks has created a sense of optimism amongst several users. Read on to know if this is the turning point for the market or simply another bull trap.
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Federal Reserve and the Inflation Controlling Measures
The U.S Federal Reserve has been under the microscope for a while, as it has been consistently looking to find ways to curb inflation that has increased astronomically in the past couple of years. With a 40-year-old high inflation rate of around 8.6%, it was crucial that the Fed took measures to battle this crisis.
However, with the level of the global and national debt, and the mistake of excess money-printing, there were limited options. Thus, a decision was finally made to increase interest rates by 0.75%- the highest ever since 1994. The Fed has claimed to look into several economic issues like high unemployment, increasing fuel rates etc and come up with solutions with time.
So while inflation rates have momentarily been put in control, it simply means that citizens will be being more money on credit card debts; car, housing and education loans.
With the market already at a steep low price, investors were excited solely at the news of potentially controlled inflation rates. This may have incentivized many to place orders and buy into the asset. But can this price rise go on?
Other Factors at Play
War has created a disruptive situation for the energy sector. With soaring fuel prices and other commodities as well, the cost of living is expected to rise regardless of the controlled inflation rate. It would be a difficult feat to speculate on the movement of the crypto market too, given the current status of global markets on a whole.
With the announcements just in, it should be a while before the effects of such a decision start impacting the markets. This current spike in price, however, to some level can be a false alarm for anyone deciding to long or short the crypto industry.
The finance minister of El Salvador, which made Bitcoin legal tender some time back, claimed that the fiscal risk was “extremely minimal”. The country currently holds around 2,301 Bitcoins in its reserves with an average buying price of around $45,000.
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Current Scenario
It is crucial to understand that the price increase in BTC, the front-runner cryptocurrency was not the kind that the asset had recorded previously. While the pump was quick to happen, it saw a direct slump right after.
On 14th June, a day before the announcement came out, BTC was trading in the $20,000 levels before running up to $22,000. This was followed by a quick rise and fall from $25,000 to $22,000 respectively.
Experts state that the growth could have been a quick response to the announcement where investors jumped at the chance to buy the asset hoping for a bullish uptrend. At the time of writing, BTC has regained its previous price range and is trading at the $20,000 level.
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