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The bitcoin price has been going through some tough times in the month of May. The currency has been trading in the high $30,000 range after several market factors – including rumors that the Fed was going to hike rates and growing conflict in eastern Europe between Ukraine and Russia – took the world’s number one digital currency by market cap down nearly 50 percent from its November 2021 high. At that time, BTC was trading at nearly $70,000.
The Fed Won’t Hike Rates Too High
However, it looks like bitcoin has risen by about six percent at the time of writing. The currency has once again hit the $40K mark after the Fed stated that while it plans to hike rates, this hike will not be out of the ordinary.
There has long been talk that the Fed was going to enforce a 75-basis-point hike. This would have made things like homes, cars, and other items that typically require loans practically unobtainable. The measures being taken are purely designed to fight ongoing inflation, which is presently at a 40-year high, though the Fed has stated that it has no intention of making things jump that much.
Instead, the Fed has said Americans can anticipate a 50-basis-point hike, which would be equivalent to about half a percent. While this is still the biggest hike in roughly 20 years, buyers can expect interest rates to stay below the six percent line.
Jerome Powell, the man at the top of the Fed ladder, explained in an interview:
A 75-basis-point increase is not something that the committee is actively considering. I think expectations are that we’ll start to see inflation, you know, flattening out.
Nick Mancini – director of research at crypto sentiment analytics platform Trade the Chain – also threw his two cents into the mix, commenting:
Any FOMC guidance that does not include a 0.75 percent interest rate increase would be bullish for both crypto and equities. We believe that the market has priced in continued hikes of 0.25 percent to 0.50 percent moving forward for 2022. This gives the market certainty, which in turn, breeds bullish price action.
Inflation Has to Slow Down!
Joe Orsini – director of research at Eagle Brook Advisors – says he thinks the market is likely going to be made tighter than ever so long as inflation continues. He stated:
These expectations set up for a ‘not all that bad’ rally should the Fed turn less hawkish than feared. The first sign of this was today when Powell ruled out a 75-basis-point hike. This kicked off the rally we’re seeing this afternoon… If there are signs that inflation is peaking, the Fed has some room to show patience. A less aggressive tightening policy would be bullish for bitcoin, ether, and digital assets, which continue to bounce harder than traditional equities.