The Federal Reserve of the United States (FED) is the country's central bank, and its main function is to regulate monetary policy to maintain economic stability. One of its key tools is the interest rate, which influences the cost of borrowed money and the liquidity of the financial system.
What happens when the FED raises interest rates?
• Increases the cost of credit
• Reduces liquidity in the markets
• Investors prefer less risky assets instead of cryptocurrencies 📉
What if the FED lowers interest rates?
• Money becomes cheaper and more abundant
• Increases investment in risk assets, including crypto
• The dollar weakens, favoring alternative assets like BTC and ETH
The FED's decisions have a direct impact on Bitcoin, Ethereum, and the crypto market in general, as they determine the flow of capital toward risk assets. Therefore, each rate announcement generates high volatility in prices.
