Bitrabo Editorial
The Federal Open Market Committee (FOMC) chose to maintain interest rates between 5.25% to 5.5% during its fourth policy meeting of the year on June 12, causing a stir in both traditional and crypto markets.
Bitcoin and Ether Take a Hit
The unexpected decision led to a sharp decline in the crypto sphere, with Bitcoin dropping from $70,000 to $66,000 and Ethereum experiencing a similar downturn. This move created heightened volatility, resulting in around $400 million in liquidations and shaking investor confidence.
Federal Reserve Chair, Jerome Powell, emphasized the Fed’s commitment to their 2% inflation target and the need to maintain a tight monetary policy despite progress in tackling inflation. This hawkish stance aims to prevent premature rate cuts that could undermine the progress made.
Crypto Market Reacts to FOMC’s Decision
The FOMC’s announcement and Powell’s comments had an immediate and significant impact on the crypto market. Bitcoin, which had reached $70,500, fell to $67,220 post-announcement. Ethereum dropped from over $3,700 to $3,400, and other altcoins like Cardano, Solana, and Ripple also saw declines of at least 8%.
Approximately $400 million in crypto assets were liquidated in response to the market turbulence, highlighting the increased volatility and investor apprehension. Moreover, US Bitcoin ETFs experienced net outflows of $200 million, breaking a streak of 19 days of net inflows. Despite temporary optimism after the US Consumer Price Index report, showing a slightly cooler inflation rate for May, the market quickly returned to its initial state, indicating lingering investor uncertainty.
Global Economic Divergence
While the US sticks to its no-rate-cut stance, other economic blocs like the European Union and Canada are opting for rate cuts to address their inflation challenges. These contrasting strategies reflect the differing economic conditions and policy choices among regions.
A study by Grayscale found that 41% of voters in the US are closely monitoring Bitcoin due to persistent inflation, signaling a growing interest in cryptocurrencies as alternative investments during times of high inflation.
Featured image from Kiplinger, chart from TradingView