How US Fed Reserve rate hike impacts cryptocurrencies

The cryptocurrency markets are in the green after the US Fed hiked interest rates on Wednesday. The global crypto market cap is at $1.06 trillion as of 11:30 am IST after rising 8.24 per cent over the last 24 hours, CoinMarketCap data showed.

Bitcoin is up a whopping 10.28 per cent and is trading at $23,335. Ethereum rose by 16.15 per cent and is trading at $1,665. The ADA token rose 10.82 per cent whereas Solana jumped by 11.40 per cent over the last 24 hours.

Will this rally in crypto tokens continue or is it a short term affair? Experts take:

Sharat Chandra, crypto markets commentator and vice president of Earth ID, a web3 platform, told Business Today, “Fed's rate hike matched market expectations and provided tailwinds for price rebound in crypto markets.”

The CoinDCX Research Team also echoed similar views.  They told Business Today, “Bitcoin is currently trading over $23,000 after a 10% surge in the last 24 hours. Also, in the post conference, Fed Chairman Jerome Powell clearly mentioned that the US is not under recession as Job Growth and Wage Measures are strong and not consistent with a recession. This has led to positive sentiments in the market.  

Dileep Seinberg, founder and CEO of MuffinPay, also held a similar perspective. He said, “Fed's commentary is likely to boost morale for the crypto space.

Chandra also highlighted that there might be an upside in the price of Bitcoin in the near term. He said, “Technical analysis indicates a rise in Bitcoin's Relative Strength Index (RSI) to 56. BTC's RSI points towards an increase in price momentum.”

He also pointed out the ‘aggressive rate hike cycle’ will likely come to an end this year. He said, “US Fed has three more meetings this year: September, November and December. Jerome Powel has stated that the broad estimates on neutral rates are on expected lines and from now on, decisions will be data-dependent. This means that the aggressive rate hike cycle will gradually end this year. Given the correlation between equities and crypto, markets will revolve around Fed's manoeuvrability based on the incoming data on inflation in the coming months.”

Seinberg pointed out that despite rally in price of cryptocurrencies, the way ahead for web3 and crypto projects will still remain choppy, but venture capitalists are betting on the industry. He said, “One has to remember that there was much gloom because of the anticipated prolonged crypto winter, whose scare is not over yet. Many projects are troubled by layoffs, scrutiny and other reasons. However, the silver lining is that venture capitalists are pouring money in digital token startups.”

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