The global market revolves around the events like interest rate decisions, monetary policy statements, and press conferences that are associated with the Federal Open Market Committee (FOMC). These events have a huge impact on assets like USD currency pairs, gold, oil including Bitcoin which usually react to the actions taken by FOMC.
Any changes in monetary policies will influence the financial market through the monetary transmission mechanism and the expectations that are set by FOMC will have an impact on asset price.
So, when the interest rate is reduced or any unusual policies are implemented, investors are forced to move away from bonds or any other interest-rate linked instruments and hop onto accumulating stocks, gold, or Bitcoin to curb higher returns. Hence creating a great demand for stocks, gold & Bitcoin.
Fed Rate Hikes Impact On Crypto!
Following the previous 25 basis point rate hike, markets reacted positively, and the valuations of many cryptos also increased subsequently.
In the short term, if the Fed decides to go ahead with the decision of increasing the rate, then the crypto market will be affected to some extent. However, when looking at mid and long-term investment opportunities in the market, these changed monetary policies will have minimal to zero effect.
The next Federal Open Market Committee (FOMC) meeting is scheduled for May 3rd and 4th. During this meeting, the representatives are expected to raise the FED Funds interest rate by 50 basis points. As per the reports they are also going to start a quantitative tightening process. Quantitative tightening is a monetary policy that is applied by the central bank to reduce the amount of liquidity within the economy.
This FOMC meeting is definitely gonna have an impact on how the market is gonna perform in the aftermath of the meeting.
On the other hand, a few crypto community members are of the opinion that the rates will remain steady with not much surge in interest rates. Hence traders will be forced to decide either to invest in bonds or switch to stocks or digital assets attracting huge demand.
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Source: https://coinpedia.org/news/crypto-market-react-to-the-next-fomc-meeting/