Crypto Markets Await Fed’s Interest Rate Decision: 25bp Rise or Cut Ahead?
• Tomorrow’s interest rate decision could be a major factor in the growth of Crypto markets.
• Banks have had a better day today, with First Republic Bank up around 30% and Credit Suisse stopping its bleeding.
• Crypto markets may see a pullback if there is a 25 basis points rise, however could surge if rates are cut.
Interest Rate Decision
Tomorrow’s interest rate decision from the Federal Reserve could have an important impact on whether Crypto continues its recent rise over the last few months. According to the CME FedWatch tool, there is a 81.9% probability of a 25 basis points rate hike, with 18.1% expecting no change in rates. Analysts suggest that the Fed should not raise rates at this time, and some even suggest that it needs to start cutting straight away in order to ease pressure on banks.
Banking Industry Reacts
The banking industry has reacted positively today, with First Republic Bank up around 30%, and Credit Suisse halting its haemorrhaging for now; UBS, which purchased Credit Suisse earlier this year is also up 8%. Treasury Secretary Janet Yellen is expected to announce today any intervention plans should any other banks fail in the future.
Crypto Markets Impacted
A further increase in interest rates is unlikely to be positive for crypto markets, as they are already suffering from losing 3 major banks providing fiat on/off ramps. However, one of the reasons for crypto’s surge since the start of 2020 has been expectation of an eventual pivot by the Fed; should that occur with an unexpected rate cut then bitcoin and crypto could really take off upwards again.
It remains to be seen what will happen tomorrow when the Federal Reserve Chairman Jerome Powell announces his interest rate decision; many expect only small cuts or even a pause until more data can be collected regarding strength within banks and general economic conditions – but expectations remain high that eventually we will see a pivot by the Fed where they begin cutting rather than raising base interest rates again soon enough.
In conclusion, how crypto markets will react tomorrow when Jerome Powell announces his interest rate decision will certainly be interesting to witness – especially given that expectations are high that eventually we will see some form of pivot by way of cuts rather than hikes sooner rather than later!