The U.S. Federal Open Market Committee (FOMC) announced its latest interest rate resolution on Wednesday, local time, raising the benchmark interest rate by 50 basis points to a range of 0.75%-1.00%, the largest rate hike since May 2000, in line with market expectations. Shortly after the Fed announced the rate hike, the price of Bitcoin rose above $40,000.
The FOMC (Federal Reserve Open Market Committee) is a branch of the Federal Reserve (also known as the Federal Reserve, the Fed), whose main task is to determine the monetary policy of the United States. The FOMC decision informs everyone about the Fed’s decision on the level of interest rates, and it’s one of the biggest risk events for financial markets. The FOMC may decide to raise interest rates, cut interest rates or keep interest rates unchanged, and any decision may have a huge impact on the dollar and even the entire financial market. The FOMC Council consists of seven directors and five Fed presidents.
The latest statement said the Fed will begin shrinking its balance sheet at a monthly pace of $47.5 billion on June 1, or $30 billion in Treasuries and $17.5 billion in mortgage-backed securities (MBS) each month. Gradually increase the cap on balance sheet reduction to $95 billion per month over the course of the month, that is, a monthly reduction of $60 billion in U.S. Treasuries and $35 billion in mortgage-backed securities.
Bitcoin rose alongside stocks, with the S&P 500 and Nasdaq Composite both gaining about 3% after the rate hike news.
Previously, the U.S. large-scale water release brought growth momentum to the crypto market. The market once believed that the interest rate hike policy would lead to a decline in the crypto market. Bitcoin and other digital assets should theoretically be traded independently of mainstream financial markets, but they have proven vulnerable to macro pressures from monetary policy. But after this rate hike, the crypto market rallied for a while. Analysts at Glassnode said in a report that despite the macro pressures, the Bitcoin market actually remains surprisingly strong in relative terms.
Market analysis believes that the main reason is that the comments made by Federal Reserve Chairman Powell at the press conference after the interest rate announcement seemed to reassure investors. Fed Chair Jerome Powell said the FOMC sees a 50 basis point rate hike (separately) as a possible option at the next several meetings; Fed Chair Powell ruled out a 75 basis point hike. Powell also expressed confidence that the U.S. can avoid a recession, a so-called hard landing, as the Fed raises borrowing costs to reduce high inflation. He noted that we have a good chance of a soft landing and the ability to deal with tighter monetary policy.
“Any FOMC guidance that doesn’t include a 0.75% rate hike would be positive for both cryptocurrencies and stocks,” said the head of research at crypto sentiment analysis platform Trade The Chain . “We think the market has priced in a further 0.25% to 0.50% rise in 2022. This provides certainty to the market, which in turn spawns bullish price action .”
Additionally, if there are any signs that inflation is peaking, the Fed has some room to be patient, and less aggressive tightening would benefit Bitcoin, Ethereum and digital assets, which continue to rally more than traditional stocks.
Notably, Bitcoin’s rally coincided with a broader stock market rally. In the end, the S&P 500 closed up 2.9%, while the Nasdaq gained more than 3%. The Dow Jones Industrial Average rose more than 932 points. Bitcoin, which continues to lead the price action of the entire crypto market, is also highly correlated with stock market movements.
The Glassnode team cautions that Bitcoin prices remain range-bound and continue to lack any clear macro momentum in either direction, the correlation between Bitcoin and traditional markets remains near all-time highs, and the wider perception of Bitcoin as a risk asset Still a major headwind.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/why-bitcoin-prices-rise-soon-after-fed-announces-rate-hike/
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