In an announcement today, thebitcoin-ether-rise-fed-holds-interest-rates-steady-crypto-world.html” target=”_blank” rel=”noopener nofollow”> Federal Reserve has decided to maintain its reference interest rate, extending a trend of stability that has persisted over three multiple meetings.
The central bank has opted for continuity, maintaining the status quo and refraining from making changes to interest rates during this period.
bitcoin experienced an increase of almost 5%, reaching $42,778, following the Federal Reserve's decision to keep interest rates stable, Coingecko data shows. The Federal Reserve's commitment to keeping interest rates unchanged has provided a positive boost to the cryptocurrency market, contributing to the notable rally in bitcoin's value.
bitcoin responds positively to the news
At the same time, ethereum It witnessed a 4% increase, raising its market value to $2,259, as the broader crypto landscape responded positively to the news, reinforcing the interconnected dynamic between traditional financial markets and the burgeoning world of cryptocurrencies.
Source: Coingecko
Interest rates have remained between 5.25 and 5.5%, their highest point in 22 years. In order to achieve a compromise between its dual purpose of managing inflation and reducing economic disruptions, the Federal Reserve has made this decision.
The central bank's accompanying statement highlighted that tighter financial and credit conditions for households and businesses are expected to put pressure on economic activity, hiring and inflation. The statement emphasized the uncertainty surrounding the magnitude of these effects.
Expectations among investors were aligned with the status quo, as the CME FedWatch tool, a reliable indicator for forecasting rate adjustments, indicated a high probability (98%) of rates remaining unchanged.
btc market cap currently at $838 billion. Chart: TradingView.com
Forcrypto-and-mainstream-markets-rally-after-fed-foreshadows-2024-interest-rate-cuts” rel=”nofollow noopener” target=”_blank”> cryptocurrency For investors, the Federal Reserve's decision to keep interest rates low or stable serves as a positive indicator.
The importance lies in the fact that when interest rates are low, investors can obtain loans on more favorable terms, which increases the attractiveness of investing in assets with higher risk profiles, such as stocks and cryptocurrencies.
The rationale is based on the reduced cost of borrowing, making it more feasible for investors to allocate funds to riskier companies and potentially generate higher returns.
The interconnection of bitcoin and financial markets
This alignment of monetary policy with the interests of cryptocurrency investors underscores the interconnectedness of traditional financial markets and the cryptocurrency landscape.
For example, following the Federal Reserve's reduction of interest rates to 0.25% in March 2020, the value of bitcoin saw a significant increase.
However, in 2022, the Federal Reserve's decision to raise interest rates to control high inflation resulted in a drop in the value of stocks and cryptocurrencies, such as bitcoin and ethereum.
Although the current situation is stable, the central bank's future course remains convoluted. Federal Reserve Chairman Jerome Powell has expressed uncertainty about the possibility of further interest rate cuts. The Federal Reserve is currently managing a challenging economic environment, aiming to control inflation while preventing a rise in unemployment or a downturn in the economy.
Featured image from Freepik
