The crypto market always looks at the Fed sessions with anticipation.

● What is the federal funds rate?

●What is its impact on the cryptocurrency market?

This is what we will discuss with you in this article. If you want to know more, we advise you to complete this article to the end!

□ What is the Federal Reserve Bank?

• The Federal Reserve Bank of the United States is the central bank of the United States of America.

▪︎ One of its responsibilities is to manage the country's interest rates, which essentially control the cost of borrowing money.

• Interest rates affect the cryptocurrency market by affecting the cost of borrowing and investing.

• When interest rates are low, borrowing becomes cheaper, which can lead to increased investment in higher-risk assets such as cryptocurrencies.

• Conversely, when interest rates are high, borrowing becomes more expensive, which may lead to a decrease in investment in high-risk assets such as cryptocurrencies.

● High interest rates tend to dampen the cryptocurrency market by reducing investors' appetite for risk, increasing the opportunity cost, leading to lower prices and bankruptcies.

◇ Decreased investor appetite for risk

As mentioned earlier, higher interest rates make safe assets like bonds more attractive.

◇ Investors seeking higher returns may be less willing to take risks on volatile cryptocurrencies when they can earn a guaranteed return on a low-risk government bond.

◇ Low-risk government bonds are debt securities issued by governments with the highest credit ratings, providing reliable income with minimal risk of default.

◇ This shift in investor sentiment could lead to a decrease in demand for cryptocurrencies, pushing prices down.

◇ Increase opportunity cost

▪︎When interest rates rise, the potential returns from holding cash or other interest-bearing assets become more attractive.

▪︎This increases the opportunity cost of holding riskier assets such as stocks, venture capital, and cryptocurrencies.

¤ Here we come to the end of the article, we hope you found it useful and enjoyable.

Do you think the interest rate will fall or rise in the next session?

• Share your opinion with us in the comments✍👇