In a move that left both traditional and crypto markets reeling, the Federal Open Market Committee (FOMC) held its fourth annual policy meeting on June 12 and decided to keep the interest rate steady in its current range of 5.25% to 5.5%.
Bitcoin, Ether Shaken
This unexpected stability caused a sharp reaction in the crypto world, with the price of Bitcoin dropping from $70,000 to $66,000 and Ethereum experiencing a similar decline. The FOMC’s reluctance to cut rates, despite earlier indications of more cuts, has fueled volatility, leading to nearly $400 billion in defaults and shaking investor confidence across the board.
Federal Reserve Chairman Jerome Powell emphasized that while there has been “significant progress” in tackling inflation, the central bank is not yet ready to ease its tight monetary policy. Powell’s hawkish stance underscores the Fed’s commitment to its 2% inflation target, suggesting that an early rate cut could undermine the progress made so far.
Ether down in the last 24 hours. Source: Coingecko
Crypto Markets Feel the FOMC Pinch
The FOMC decision and subsequent remarks from Powell had an immediate and dramatic impact on the crypto markets. Bitcoin, which had risen to an impressive $70,500 on Tuesday, fell to $67,220 following the announcement.
Ethereum followed a similar trajectory, falling from $3,700 to $3,400. The decline was not limited to these two giants; altcoins such as Cardano, Solana, and Ripple each fell by at least 8%.
BTCUSD trading at $67,411 on the 24-hour chart: TradingView.com
After this volatility, about $400 million worth of crypto assets were liquidated in the last two days. This wave of currency freezes highlights the rising volatility and investor anxiety pervading the market. Further exacerbating the situation, US spot Bitcoin ETFs recorded net outflows of $200 million, breaking a 19-day streak of net inflows.
Despite a brief moment of optimism after the release of the US Consumer Price Index (CPI) report—which showed a year-on-year inflation rate of 3.3% in May, slightly cooler than the 3.4% expected—the crypto market quickly bounced back. its initial levels. This reaction underscores the continued lack of investor confidence amid continued economic uncertainty.
Bitcoin plummets in the last week. Source: Coingecko
The World’s Economic Strategies Are Disintegrating
While the US is maintaining a strong stance against early rate cuts, other economic blocs are using different approaches. The European Union and Canada, both facing their own inflationary pressures, have opted to cut rates this year. These different strategies reflect different economic conditions and policy preferences in different regions.
Back in the US, a survey supported by Grayscale revealed that 41% of voters pay more attention to Bitcoin due to the country’s persistent inflation. This growing interest in cryptocurrencies highlights the increasing public scrutiny of traditional economic policies and the search for alternative investment opportunities in an environment of high inflation.
Featured image from Kiplinger, chart from TradingView
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