To combat the highest inflation rates in more than four decades, on June 15th, the U.S. Federal Reserve decided to raise interest rates by 75 basis points, a move that shook financial markets throughout the world.
According to data from Cointelegraph Markets Pro and TradingView, Bitcoin (BTC) and the broader cryptocurrency market were under pressure in the early trading hours of June 15 as rumours of the potential collapse of Three Arrows Capital (3AC) spread throughout the ecosystem, which is still grappling with the ongoing Celsius debacle.
Daily cryptocurrency market performance. Source: Coin360
Following Federal Reserve Chair Jerome Powell’s announcement of a 75 basis point hike, the price of Bitcoin briefly spiked to $22,520 before falling back to $21,500.
BTC/USDT 4-hour chart. Source: TradingView
The altcoin market also experienced a brief price increase as dire predictions of a 100 basis point hike failed to materialise, and the market got largely what it expected from the Federal Open Market Committee (FOMC) meeting on June 15.
Traditional markets reacted positively to the announcement, with the S&P 500, Dow, and NASDAQ all trading in the green for the day, but traders should wait until the daily close and tomorrow’s opening bell to see how markets behave.
Analysts examine the rate hike and its potential impact on cryptocurrency prices
Shortly after Powell announced the 75-basis-point hike, forecasts for when the Fed would begin cutting rates began to emerge, with the dominant consensus being that they would begin in 2024.
BREAKING: The biggest rate increase since 1994 from the FED.
However, expectations from FED policymakers are that they’ll be starting to cut rates in 2024.
— Michaël van de Poppe (@CryptoMichNL) June 15, 2022
The main reason for the increase in interest rates has been skyrocketing inflation, which came in at an 8.6% year-over-year increase according to the latest Consumer Price Index (CPI) print, which was higher than what economists had projected.
Some analysts have begun to hypothesise that the Federal Reserve is attempting to get ahead of the curve and establish enough leg room to be able to pause future rate hikes if economic conditions continue to worsen.
They seem to be coming around to what I thought they would do in January (even before Ukraine). Frontload hikes which gives them cover to hit the pause button later while things may still be a bit too hot. I would expect to hear hawkish rhetoric today (gotta hike anyway).
— The Long View ✪ (@HayekAndKeynes) June 15, 2022
Overall, the anticipated rate hike appears to have been priced into the cryptocurrency market, as prices remained relatively flat following the announcement. At this point, more crypto-specific developments are grabbing headlines in the industry.
The total cryptocurrency market cap is now $931 billion, with Bitcoin dominating at 44.5%.