BREAKING : FED Announced its Critical Interest Rate Decision! Good or Bad for Cryptos?
Interest Rates and Bitcoin: A Complex Relationship
Historically, rising interest rates have been associated with a stronger US dollar and increased foreign exchange rates. This can lead to a decrease in demand for riskier assets like Bitcoin.
However, recent trends suggest a different story. Despite the Fedâs rate hikes, Bitcoin has defied expectations and continued to perform well.
Unintended Consequences of Rate Hikes
When the Fed raises interest rates to combat inflation, it can inadvertently affect the broader economy.
Rising financial asset prices (including cryptocurrencies) can boost capital gains taxes and government revenue. But when rates go up, these prices may stagnate, reducing tax income.Paradoxically, the Fedâs rate hikes can fuel economic growth by stimulating spending and nominal GDP growth.
Cryptocurrency Industry Resilience
Regardless of whether the Fed raises or cuts rates, the cryptocurrency industry remains in a favorable position.
Unlike traditional businesses, AI companies (such as Nvidia) are less reliant on banks for loans or credit. Their robust revenue streams make them more resilient.Filecoin (FIL), benefiting from the AI-crypto crossover, is positioned for growth due to increasing computational power in its network.
Bitcoinâs Immediate Reaction
Following the Fedâs announcement, Bitcoin faced selling pressure and briefly dipped to $68,800.However, subsequent price movements indicated that these declines were temporary, with $BTC recovering a significant portion of the losses.
Jerome Powellâs Press Conference
All eyes are now on Fed Chairman Jerome Powellâs press conference, scheduled for 21:30 GMT.
Powellâs statements may provide further insights into the Fedâs stance and its potential impact on Bitcoin and other assets.
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