Bitcoin and ether were trading slightly lower Wednesday morning as crypto traders await the Federal Reserve’s decision.
Over the past 24 hours, BTC’s price has fallen to $20,400–a decline of less than 1%. Despite this, investors don’t seem too worried.
Bitcoin has been hovering below $20,500 for a week now. Still, traders have high hopes, considering that before this increase BTC was stagnant at the $19,000 mark for two months.
The Federal Reserve’s Interest Rate Decision
All of this news is just talk unless the importance of the Federal Reserve’s interest rate decision today is noted.
The Fed raising interest rates by 75 basis points is expected–a range of 3.75% to 4%. This would be the highest level since 2008.
Should this happen, it would be the sixth time the Fed has raised interest rates this year. This decision would ultimately make it more expensive for businesses and consumers to borrow money.
This likely isn’t the last increase of 2022. It’s also expected the same will happen at the December meeting–all in an attempt to combat inflation–which was at 8.2% in September.
What This Means for Crypto
The Federal Reserve meeting November 1-2 undoubtedly has an impact on stocks and other investments. The prior five interest rate spikes have already had an impact on cryptocurrency, stocks and commodities.
Cryptocurrency, for example, peaked in November 2021. But the market has had a less-than-ideal 2022.
Caleb Tucker, director of portfolio strategy at Merit Financial Advisors notes that “just the expectation of higher rates has had an impact.”
Maybe this is why Uptober wasn’t all it was hyped up to be for Bitcoin.
“From the beginning of 2022, stocks have pulled back and interest rates have moved higher due to expectations the Federal Reserve would hike interest rates repeatedly to corral inflation,” said Greg McBride, Bankrate CFA.
This has caused BTC to fall close to 71% from its November 2021 all-time high. Ethereum saw a similar decline–70%.
Cryptocurrencies have historically been a cure-all compared to other assets. Now, however, it seems as though the crypto market falls when others do.
“Crypto assets had been seen as an inflation hedge but recently they have acted more like other risk assets such as stocks,” said Tucker. “Higher rates will be a headwind for crypto assets going forward.”