The crypto market has had a terrible year in 2022. The economic environment has been relentless, and today’s FOMC meeting adds to the overall crypto anguish. The Federal Reserve, which is headquartered in Washington D.C., began its two-day monetary policy meeting.
The Federal Open Market Committee (FOMC), the monetary policy-making body of the Federal Reserve, will decide on the next interest rate increase in their ongoing meeting. Analysts have predicted that the meeting will be a game changer for the crypto industry.
The Federal Open Market Committee (FOMC) is made up of 12 members. This includes seven governors from the Board of Governors, one president from the Federal Reserve Bank of New York, and four presidents out of the remaining 11 Reserve Banks on a rotating basis.
FOMC hike rate decision threatens a severe crypto market tumble
In 2022, the FOMC’s higher rates have already been felt in equities, cryptocurrencies, commodities (such as oil), and a variety of other assets. But what can investors anticipate going forward, and how long will the rising-rate environment have an impact on markets?
Four times this year, the Fed has raised rates, and it’s easy to see when markets really realized that the central bank wasn’t kidding about its plans to tighten monetary policy. In November 2021, crypto and many riskier stocks peaked. However, since then, digital assets have mostly trended downwards.
Bitcoin, the top cryptocurrency, has plummeted approximately 71 percent from its record high in November. Ethereum, the second-largest cryptocurrency, is also experiencing a significant drop of 68 percent. However, Ethereum is currently going through something called a “merge.”
The FOMC’s decision to raise interest rates is expected to influence risky class assets greatly. But market experts are divided over whether the Fed will go too far or not far enough and whether this has already been reflected in stock and crypto prices. This uncertainty generates heightened volatility in the markets.
Cryptocurrency has often been painted as a solution to various issues: inflation, low-interest rates, lack of purchasing power, devaluation of the dollar, and more. Those advantages were easy to buy into when crypto was going up, regardless of other assets. However, that narrative has taken a turn for the worse in recent months.
On Wednesday, Bitcoin was unstable at around $19,300 after a cryptocurrency sell-off that lasted for an entire week. This is because crypto investors are preparing themselves for the FOMC’s interest rate hike decision later in the afternoon.
Bitcoin analysts are watching to see where the digital asset will trade following the central bank’s key decision. The summer low of $17,708 on June 17 is considered a key testing point.
Major crypto coins take a nosedive
Right now, the top cryptocurrencies are going through a rough patch in what seems to be a bearish market. Bitcoin (BTC) is currently leading the way and has fallen by nearly $19,000. As of this writing, BTC is being traded at around $19247. Additionally, Ethereum is trading at 1,321 USD.
Although Ethereum has had great success with its technical upgrade, the Merge did not positively affect ETH’s price. In fact, the price of Ethereum has dropped more than 16% in the past week. The Merge has put the second largest crypto back on the SEC’s radar, albeit a technical accomplishment for the Ethereum protocol.
Other top coins have suffered significantly. Binance Coin (BNB) is down 2.39 percent in the last 24 hours, according to CoinMarketCap. Solana and Cardano are also lagging behind with significant losses. In the last 24 hours, the movement of the top 10 crypto coins has been uncertain. The Cryptopolitan team has maintained a comprehensive watch on each crypto coin and categorized them with precision.
The FOMC’s upcoming decision about the interest rate will have a significant impact on Bitcoin and other major cryptocurrencies. However, most crypto traders are already anticipating a .75% increase. Many experts believe that a 75bps increase will result in a bitcoin price surge as soon as it has been fully valued in.
If the FOMC delivers less than a 100 basis points hike, it would make sense to see a small relief rally — this could be quite large if the FOMC were to deliver less than a 75 basis points increase, although this seems highly unlikely.
John Toro, head of trading at Independent Reserve
While the dollar’s recent growth might be good news for American leaders and businesses, it has had the opposite effect on bitcoin. According to one source, bitcoin is “very sensitive to rate increases.” In other words, as the value of the dollar goes up, the value of bitcoins go down. Since January 1, the dollar has grown by 15.78%. The current USD strength rate has not been witnessed for the last 20 years.
The crypto market is in for a long week
The Federal Reserve’s upcoming decision on the FOMC rate isn’t just affecting the cryptocurrency industry – traders all over are scrambling to make last-minute moves. The Federal Reserve’s decision comes amid an action-packed week on the policy front, with the Bank of Japan and the Bank of England both scheduled to speak about rates on Thursday.
The reviews may spark big swings in global markets as traders struggle to determine where borrowing rates will go after the recent significant hikes by the Riksbank and the Bank of Canada.