Fed Rate Hike Sends Shocks Through Cryptocurrency Markets

The Federal Reserve's decision to raise interest rates has led to a sharp drop in cryptocurrency prices, but Bitcoin and others have since recovered some losses. On September 17, the Fed raised its benchmark rate by 25 basis points to 3.75-4.00%, its first increase in three years.

Cryptocurrencies like Bitcoin fell significantly on Thursday, with Bitcoin dropping to a low of $75,351. However, it quickly recovered and was trading at around $76,305, up 0.55% over the past 24 hours but down 2.53% over the week.

Rajagopal Menon, Vice President of WazirX, believes that the rate hike will shift focus to crypto investors, making short-term assets like Bitcoin less attractive due to increased costs and reduced liquidity.

Menon also notes that inflation outlook will be key for global retail investors, with higher rates potentially strengthening the dollar and reducing near-term appetite for cryptocurrencies. The impact in India would largely come through global liquidity, dollar strength, and risk sentiment.