In a move that threw traditional and crypto markets into disarray, the Federal Open Market Committee (FOMC) held its fourth policy meeting of the year on June 12 and decided to keep interest rates stable in their current range of 5.25% to 5.5%.
Bitcoin, ether shaken
This unexpected stability sparked a strong reaction in the crypto world, with The price of Bitcoin in free fall from $70,000 to $66,000 and Ethereum is experiencing a similar slowdown. The FOMC’s reluctance to cut rates, despite previous indications of multiple cuts, amplified volatility, leading to nearly $400 million in sell-offs and shaking investor confidence across the board.
Federal Reserve Chairman Jerome Powell stressed that although “considerable progress” has been made in the fight against inflation, the central bank is not ready to ease its restrictive monetary policy. Powell’s hawkish stance underscores the Fed’s commitment to its 2% inflation target, suggesting premature rate cuts could undermine progress made so far.
Ether down in the last 24 hours. Source: Coingecko
Crypto Markets Feeling the FOMC Pinch
The FOMC decision and Powell’s subsequent remarks had an immediate and dramatic impact on crypto markets. Bitcoin, which had climbed to $70,500 on Tuesday, fell to $67,220 after the announcement.
Ethereum followed a similar trajectory, dropping from over $3,700 to $3,400. The slowdown was not limited to these two giants; altcoins like Cardano, Solana, and Ripple each suffered declines of at least 8%.
BTCUSD trading at $67,411 on the 24-hour chart: TradingView.com
As a result of these fluctuations, almost $400 million worth of crypto assets have been liquidated over the past two days. This wave of liquidations highlights the increased volatility and investor anxiety permeating the market. The situation is getting even worse, according to the American spot Bitcoin ETF recorded net outflows of $200 million, breaking a 19-day streak of net inflows.
Despite a brief moment of optimism following the publication of the American consumer price index (CPI) report– which showed a year-over-year inflation rate of 3.3% for May, slightly lower than the expected 3.4% – the crypto market quickly returned to its initial levels. This reaction highlights the continued lack of investor confidence amid continued economic uncertainty.
Bitcoin plummets in the last week. Source: Coingecko
Global economic strategies diverge
While the United States maintains a strong stance against premature rate cuts, other economic blocs are taking different approaches. The European Union and Canada, both grappling with their own inflationary pressures, opted to implement rate cuts this year. These divergent strategies reflect different economic conditions and policy preferences across different regions.
In the United States, a survey supported by Grayscale reveals that 41% of voters are paying more attention to Bitcoin due to the country’s persistent inflation. This growing interest in cryptocurrencies highlights the growing public focus on traditional economic policies and the search for alternative investment opportunities in an environment of high inflation.
Featured image from Kiplinger, chart from TradingView
