HomeCryptoBitcoinThe Fed moves towards raising rates, and Bitcoin falls

The Fed moves towards raising rates, and Bitcoin falls

The announcement by the Federal Reserve (Fed) anticipating a rise in interest rates by the end of 2023 was bound to have repercussions on Bitcoin. Yesterday, not surprisingly, Bitcoin finally abandoned the $40,000 mark, where it had been in recent days, and returned to $37,500. The loss is currently limited at 2.7%. 

Bitcoin investors also seem to be concerned about the Fed’s decision. Indeed, accommodative policies could soon end, with interest rates stuck between 0 and 0.25%. But above all, financial stimulus, i.e. the purchase of securities, a practice known as quantitative easing, could end. The so-called tapering, i.e. the gradual reduction of these purchases, would be implemented. But this, said Chairman Jerome Powell, is still premature. It will take time. 

However, the Fed also expects the US economy to grow, with a 7% increase in GDP in 2021, +3.3% in 2022 and +2.4% in 2023. Inflation is also expected to rise. Indeed, Powell anticipated that it might even be higher than expected. 

In any case, the Fed will intervene if necessary. 

Bitcoin’s reaction to the Fed’s decisions

As mentioned, Bitcoin, in line with the general market trend, experienced a slight drop after the Fed’s announcements

However, analysts’ forecasts remain optimistic. In fact, many are predicting that inflation will do Bitcoin some good as it will increasingly become a safe haven asset

In addition, a suggestive hypothesis is circulating that has little to do with the Fed (proving that Bitcoin is different from traditional finance). According to Forbes, a short squeeze may be taking place on Bitcoin, the same as on Gamestop. The hypothesis is that there could be a sudden increase in price that could put those who are shorting using leverage in a difficult position. 

Of course, periods of lateralization such as the current one are then followed by turbulent movements: upwards they could lead Bitcoin to break through the $40,000 mark. Downwards they could take it back to 30,000. All that remains is to wait for market developments. 

Eleonora Spagnolo
Eleonora Spagnolo
Journalist passionate about the web and the digital world. She graduated with honours in Multimedia Publishing at the University La Sapienza in Rome and completed a master's degree in Web and Social Media Marketing.