Bitcoin has shot up beyond the $40,000 mark once again. This goes against what everyone has been saying for several weeks – that another rate hike instituted by the Fed will cause the world’s number one digital currency to fall drastically.
The Fed Has Pushed Rates Higher Along with BTC
By contract, bitcoin – which has been trading for around $39,000 – has now moved beyond $40K and is likely to incur even more jumps in the coming days.
The Fed initiated another big interest rate spike last Wednesday, with rates going up another quarter of a percentage. This is the first major rate hike since 2018 and basically spells trouble for people who may be looking into purchasing homes, cars, or other large (and necessary items). It appears all the COVID aid provided by the Fed and similar institutions is coming to an end, and the world is returning to “normal.”
In addition, the Fed has issued a statement suggesting that more rate hikes are set to occur before the year is out. While this may be bad for some areas of the financial industry, bitcoin appears to be flourishing at the time of writing, having shot up overnight by nearly five percent. The currency is presently trading for over $41,000. Michael Safai – managing partner at crypto prop trading firm Dexterity Capital – explained in an interview:
The initial de-risking has already happened, which is reflected in the lower level of liquidations overall.
Ben McMillan – founder and chief investment officer at IDX Digital Assets – mentioned:
I think a lot of bad news has already been priced in. What we’re seeing is that bitcoin has been extremely range bound these last few weeks with the onset of the Ukrainian conflict. It’s been like watching a Ping-Pong ball match, just kind of back and forth between support and resistance.
The Fed has not insinuated how it’s going to bring down its balance sheet in the coming weeks, though Jerome Powell – the organization’s chairman – explained that runoff could begin as early as the next meeting, which is scheduled for May 4.
What Happens Next?
Tony Nyman – the FX fundamentals manager at Informa Global Markets – explained the Fed is on the “very hawkish side of things,” but that he doesn’t anticipate the Fed will do anything too drastic in the coming future. However, there’s always the possibility that things will become more aggressive. He said:
But again, there is huge economic and global uncertainty now surrounding the prices outlook and Ukraine, so what I’d say [is] we have to stick with this hawkish notion, but there is probably room for disappointment on the hawkish side to hear.
Alongside bitcoin, it looks like U.S. stocks are also doing relatively well at press time, with the S&P 500 having shot up by more than two percent and the Dow ending more than 1.5 percent higher.