Bitcoin Price Climbs Following Fed Interest Rates Hike by 0.75 Percentage Points
The Fed decision to hike interest rates by 0.75% caused the price of Bitcoin to above $22K following a losing week.
The price of Bitcoin (BTC) jumped 5% taking the leading crypto above $22,000, following the recent 0.75% interest rate hike by the Fed. The US apex bank recently increased interest rates by 75 basis points for the second consecutive time to combat rising inflation. Data from Cointelegraph Markets Pro and TradingView showed BTC/USD reacted positively to the Fed development as BTC bulls are slowly reaping the rewards.
The Fed released a press statement following its decision to hike rates for the fourth time this year. According to the US central bank, “the [Federal Open Markets Committee (FOMC)] seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.”
Deeper Analysis of Bitcoin Price Positive Reaction to Fed Actions
Bitcoin price was not the only digital currency to react positively to the Fed rates hike announcement. The price of Ethereum (ETH), the largest altcoin and second-largest crypto by market cap, also saw an increase of 12.5% following the news. These price upswings come on the heels of a losing week for both digital currencies that saw the total crypto market cap drop. According to reports, the total value of all digital currencies temporarily dipped below $1 trillion, shedding 6% in the process.
Besides the crypto market, the more traditional stock market also saw some relief from the Fed rate hike development. Ahead of the FOMC’s meeting, all three major stock indexes were trading higher. For example, the S&P 500 was up 1.39% while the Nasdaq Composite rose to 2.48%. In addition, the Dow Jones Industrial Average also saw a marginal increase of 0.3% for the same period.
In light of these developments, Wall Street macro strategist David Hunter says that there are more gains ahead. As he put it:
“No matter what the Fed decides today (75 or 100bps), the market is poised for a move higher to S&P 4150–4200 & then maybe a sharp, short pullback to 3800 before a much bigger, more sustainable rally to 6000 gets underway.”
Inflationary Pressures Trigger Rates Hikes Across US, Europe & Canada
The Fed’s latest fiscal policy move did not surprise analysts who predicted a 75-basis-point hike this month. Furthermore, The Fed’s consecutive 0.75 percentage point increase follows a similarly audacious move taken by the European Central Bank (ECB) a week ago. Like the US, the eurozone is also facing inflationary pressure. However, while the market anticipated the Fed’s monetary decision, the ECB’s latest rate hike shocked investors. Part of the surprise was that the ECB increased interest rates by 50 basis points, much larger than expected. This is the first ECB interest rate hike in 11 years.
In early July, the Bank of Canada also increased the policy interest rate by 100 basis points.