Federal Reserve Rate Hikes Spell Trouble for Crypto Market
The Federal Reserve's interest rate hikes have many wondering how they will impact the crypto market.
Simply put, rate hikes tighten global US dollar liquidity, which is generally negative for crypto. Mainstream coins like Bitcoin and Ethereum come under pressure, while altcoins often face larger declines.
Bitcoin itself is a non-interest-bearing risk asset, so when rates rise, US Treasury yields increase, making risk-free financial products more attractive. As a result, funds flow out of the crypto market.
The cost of borrowing also rises, causing leveraged capital in crypto to contract and amplifying price drops during downturns.
However, it's essential to remember that the market trades on expectations, not actual results: if rate hike news was already priced in, a rebound may occur once the news becomes official. But if the Federal Reserve delivers a more hawkish stance than expected, the market could drop quickly.