The US Federal Reserve has announced a significant 0.75 percent rate increase as part of a strategy to curb inflation, catalyzing a brief push in Bitcoin prices beyond $23,000.
The US Federal Reserve raised benchmark interest rates by 0.75 percent, heralding the second major rate hike in succession on Wednesday, July 27. Statements issued by the Reserve indicate “ongoing increases” in rate hikes, following a rate increase trend that represents the largest rate change since 1994.
The $1.09 trillion cryptocurrency market, recovering from $2 trillion in cumulative losses since late 2021, traded at $23,239 subsequent to a 1.7 percent gain on Thursday morning. Further rallies saw Ethereum prices increase by 2.4 percent to $1,626.73. Both Ethereum and Bitcoin captured 5 percent gains across a 24-hour period subsequent to the announcement.
Interest Rate Hike Highest in Decades
Federal Reserve chair Jerome Powell indicated that rate hikes may slow, sparking an equity rally on Wednesday that pushed through to digital asset markets. The impact of Fed rate interest hikes on the cryptocurrency market follows events that include a regulatory probe into cryptocurrency exchange platform Coinbase and Celsius bankruptcy court proceedings.
Multi-decade high USD inflation has seen the Federal Reserve adopt an aggressive stance toward a tighter monetary policy. Standard rate hikes typically sit at 25 basis points — the 75 percent basis point increase executed by the Fed in June represents the first three-quarter hike in almost three decades.
Fears of an impending recession amidst economic disruptions from the conflict between Russia and Ukraine have generated concerns of 100 basis point rate hikes within the larger cryptocurrency community, with market trends indicating the announcement of a 75 bps hike failing to meet market participant concerns.
Further Fed Meetings Hold Potential to Trigger Volatile Asset Sell-Off
The next Federal Reserve meeting expected to potentially alter interest rates scheduled for September, paired with ongoing macroeconomic factors such as parity between the EUR and USD and the wider economic environment could potentially trigger a sharp sell-off in more volatile, riskier assets such as cryptocurrencies.
The US Federal Reserve is not alone in increasing interest rates to address inflation concerns. The Bank of Canada announced a policy rate interest increase of 100 basis points in July, while the European Central Bank announced its first interest rate hike in over a decade last week.
