Digital Assets Dips As Federal Reserve Disclosed The 0.75% Surge In Rate

The Federal Reserve publicized the highly anticipated increase in the bank rate yesterday morning. The rate surged by 0.75%. However, it has adversely affected the entire crypto market, as some investors expected.

Fed’s Rate Hike Pull BTC And ETH Down

Comparing this bank rate’s great surge to March’s near-zero, it reveals that the US apex bank has enforced the fastest increase in bank rate for the first time since 1980. The Fed pegs the new rate between 3% to 3.25%.

The top digital currencies become unstable for a while after the announcement of the rate before dropping, just like share prices in the nation’s stock exchange.

Coingecko statistics reveal that both top digital assets dropped more than 4%. BTC, priced above $22,000 last week, dipped below $19000, recording a 1.5 percent fall in 24 hours. Ethereum also fell by around $50, but it wasn’t as drastic as BTC’s fall.

Meanwhile, ETH is trading around $1250, a 5.5% dip in 24 hours. Notably, the digital asset has dipped since the upgrade to the Point-of-Stake consensus mechanism on the 15th.

The Bank Rates Keep Affecting Digital Assets 

The recent rate surge of 0.75% is the third consecutive time the Federal Open Market Committee increased the bank rate by 0.75. It reveals that inflation is mounting pressure on the United States. 

The digital market is not happy with these developments. The surging rates affect the digital market through its effects on economic data that are related to inflation 

Consequently, digital assets have adversely reacted to the persistent bank rate increase. Bitcoin and Ethereum dipped by 5% and 7%, respectively, within 24 hours of the announcement of the August inflation rate by the Bureau of Labor Statistics.

Speaking to the New York Times after his meeting, Powell said they would have taken fewer sacrificing measures if there were any. He further added that we must cope with the rising inflation rate. It indicated that the US apex bank finds it hard to control the surging inflation rate.

Meanwhile, some analysts believe BTC will drop to $10,000 even before the increase in bank rate starts affecting the digital market. It is, however, unknown how deep the prices of digital assets will sink this year.

Similarly, Riyad Carey, a crypto analyst at Kaiko, predicted all digital assets would lose the power to resist the effects of the bank rate hike soonest. He added that the Fed’s rates dictate the direction of the crypto prices.

However, the chair of MicroStrategy is still optimistic that BTC will hit last year’s high of over $68,000 in the coming years. He further stated that if the leading digital asset manages to match gold’s market cap, it will trade for around $500,000 in the long run.