The Federal Reserve (Fed) raised, as expected, its interest rates.
Cryptocurrency prices were climbing Thursday following the Federal Reserve’s decision to start raising interest rates for the first time since 2018.
The U.S. central bank lifted its benchmark Federal Funds Rate by 0.25%, to a target range of between 0.25% and 0.50%.
Bitcoin was up nearly 2% to $41,073 at last check, according to CoinGecko, while ethereum jumped 5.4% to $2,812 and dogecoin 3.6% to $0.117618. Avalanche soared 14.7% to $80.98.
‘A Massive Cryptocurrency Market Rally’
Ryan Detrick, chief market strategist for LPL Financial, noted that “the Fed didn’t rock the boat much.”
“Yes, they lowered economic expectations in 2022 while also increasing inflation, but much of that was already priced into things,” he said. “Overall, they still see strong growth, which helps support the recovery.”
“Bitcoin was able to recapture the $40,000 level after Fed Chair Powell signaled monetary policy was going to get restrictive for the US economy, sending the dollar sharply lower,” Edward Moya, senior market analyst for the Americas with Oanda, said.
“Bitcoin is leading a massive cryptocurrency market rally today,” said Alexander Mamasidikov, co-founder of mobile digital bank MinePlex. “The unprecedented growth is stirred in part because the 25 basis point interest rate hike from the US Federal Reserve is not damning enough to worry crypto investors, hence solidifying their renewed buying spirit.”
Mamasidikov said the broader crypto ecosystem now “has more news fundamentals to dwell on as up to six interest rate hikes are expected through the year.”
“Prior to when the impact of the rate hike will start becoming felt in the broader economy, the investors stacking up on the nascent asset class would have gotten in at a significant discount, translating into gains in the long run,” he said.
A price high of $50,000, he added “remains a significant target by mid-to-late Q2 of this year.”
‘Very Bullish for Bitcoin’
Keegan Francis, bitcoin and crypto specialist, Finder, said that “in terms of the short term effects on bitcoin, I can see it going either way.”
“Meaning, I can see the price respond favorably because it’s an acknowledgment that inflation is high, or decreasing because of increased pressure on the cash flow of investors,” he said. “In the long term, the outlook is pretty clear though. Bitcoin is going up because inflation is high.”
Francis said that cryptocurrency “more generally is a mixed bag, because there is not the same inflation hedge narrative as there is with bitcoin.”
“I can’t really offer a comment on what this rate-hike does to cryptocurrency as its anyone’s best guess,” he said “My position in general though is that this is very bullish for bitcoin.”
