Robert Steinadler, a month ago

Fed interest rate hike leaves crypto unimpressed

Today was the big day, and many traders spent their time in front of their screens waiting for Jerome Powell's speech during the press conference. Another FOMC meeting concluded, and another interest rate hike was announced. 

What are the Fed's expectations for the coming months, and which scenarios are presented to investors and crypto?

Another small rate hike

Many analysts hoped the regime would change and the Fed would opt for a dovish approach. They were hoping that interest rate hikes could have been possibly paused. As a result, they may have to be more patient.

During today's press conference, Jerome Powell reiterated the commitment to lower inflation and meet the 2% goal. However, with just another 25-bps interest rate hike, this could take a while longer. Powell mentioned that taking further actions would only be appropriate throughout the upcoming months. This has been interpreted as a sign that the next few rate hikes are indeed a done deal.

The Fed operates in a challenging environment with a full-blown banking crisis. However, raising the interest rate is hard in such a difficult situation because it creates additional pressure on the economy, households, and banks.

Crypto reacts neutrally

Prices dipped throughout the board, and cryptos lost a bit after Powell elaborated that the Fed would continue the rate hikes. However, there was no major sell-off or high volatility, which paints an overall neutral picture when measuring the reaction to the speech.

Powell also pointed out that more details would be released with the Fed meeting minutes when asked by journalists for clarification. This could mean the markets are still not out of the woods yet, as many traders are especially reacting to small details that will be released later.

In conclusion, we might see higher volatility when more details become available to the public. The next important date is May 10, when US CPI data is released for April. While the Fed is dancing on a tightrope, it remains to be seen if crypto, specifically Bitcoin, can provide a safe haven during uncertain times.

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