Vitaly Sova
The Federal Reserve held interest rates steady for the first time since the aggressive tightening cycle began in March 2022, but indicated that two rate hikes may continue this year to contain inflation pressures.
Introducing the first part of our encryption Roundtable, Alpha seeks access to eight analysts for their opinions on the implications for cryptocurrency market investors of the hawkish central bank pause.
A handful of them, including Keenan Mill and Logan Kane, have put together a bull case for bitcoin (BTC-USD), the largest cryptocurrency by market cap, as the Fed’s ongoing inflation battle creates an attractive backdrop for inflation hedging.
Like other risk assets, the prices of digital tokens such as Bitcoin (BTC-USD) and Ethereum (ETH-USD) are sensitive to interest rate movements in that they generally do well when monetary authorities cut prices, (eg March 2020), while Price highs are usually bearish for cryptocurrencies. BTC experienced some pressure after the price decision. Dipping 2.8% to $25.1K around 6:00 PM ET.
“If investors come to believe that inflation is entrenched and the Fed continues to rally, that could be good for all inflation hedges, including Bitcoin,” Mel said.
Conversely, SA’s John Miller said, “Stable inflation means a hawkish Fed, and continued headwinds for crypto as regulatory battles intensify in the fall.”
Other SA analysts advised watching Bitcoin (BTC-USD) and stocks, both of which have been sharing a negative correlation in recent weeks, with BTC down 6.4% and the S&P 500 down 6% from last month.
“If the rate halt turns out to be a ‘buy the rumour, sell the news’ event for equities, we could see a re-correlation between bitcoin and equities — not in the way we would hope,” said Mike Fay, president of the investment group. From “BlockChain Reaction.”
Meanwhile, David Houston emphasized that “we should expect pressure in both markets as the time horizon for waiting for the official hiatus has been pushed back to later this year.”
Here is the full Q&A roundtable.