The US Federal Reserve on Wednesday raised the interest rates by 75 basis points, or 0.75 per cent, the highest two-consecutive rate increases since the 1980s. As an outcome, the crypto market soared on Thursday, lifted by price gains in Bitcoin, the top cryptocurrency by market value, which rose to $23,000.
During the typical post-meeting press conference, Jerome Powell, the Federal Open Markets Committee (FOMC) and Federal Reserve chairman, discussed the rate rise and stated that he does not believe the US economy is in a recession.
Following his comments, the total cryptocurrency market volume surged to $93,000,000,000 in the last 24 hours, the highest this week, helping the market to reclaim its valuation of $1.1 trillion.
Powell said, “I do not think the US is currently in a recession and the reason is there are too many areas of the economy that are performing too well,” He added that “This is a very strong labor market ... it doesn’t make sense that the economy would be in a recession with this kind of thing happening.”
What Does It Mean For Crypto World?
Rajagopal Menon, vice president at WazirX, a crypto exchange, said that “since the announcement, we have seen a rise in the prices of Bitcoin and Ethereum, resulting from positive investor sentiment, indicating that peak Fed hawkishness is behind us.”
"The price of BTC has always reacted to the outcomes of these FOMC meetings. We may have to wait and see how far-fetched this price reaction is going to be," he added.
However, crypto industry experts believe that the US Fed rate hike comes as no surprise. Still, there has been robust demand for domestic stocks and a stronger Rupee. Also, the exodus of foreign funds from Indian equities, induced by the recent Fed rate hikes, seems to have stopped.
"The real effects may still be a bit far but the cues say that the Indian crypto space will stand to benefit as the domestic markets look attractive. There could be fresh fund infusion round the corner as investors would explore non-traditional and dynamic avenues to park their funds for higher returns," says Vikram Subburaj, CEO of Giottus Crypto Platform.
Subburaj further noted that the global crypto markets will start looking healthy once the US Fed confirms that inflation has peaked and that future interest rate hikes will be limited. That said, geopolitical tensions continue to present issues that can bring in volatility.
This year has been extremely difficult for the cryptocurrency industry, with billions of dollars being lost as a result of business failures and macroeconomic problems. Crypto lending platform Celsius and hedge fund Three Arrows Capital are two well-known examples that have both declared bankruptcy and lost many investors.
“Previously, when the key rate was raised, market participants could observe the opposite picture. This time, however, the leading digital assets continue to rise despite the increase in Fed's interest rates,” said Johnny Lyu, CEO of KuCoin , a Global Crypto exchange.
“It shows that though the Fed's rate remains an important factor, it is not a determining factor in establishing the price of cryptocurrencies, said Johnny Lyu, CEO of KuCoin , a Global Crypto exchange,” Lyu added.