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Attempts by the Fed to rein in inflation by boosting interest rates are typically accompanied by a decline in investment activity across markets.
Since the news of a 75 basis point interest rate rise in the United States, the cryptocurrency markets have been surging, with analysts speculating that the markets may have initially anticipated far worse.
In response to the Federal Open Markets Committee's (FOMC) decision to raise interest rates once more, the price of Bitcoin (BTC) increased by almost 8% on July 27 to over $22,500. Ether (ETH), Polkadot (DOT), and Polygon (MATIC) all had double-digit price increases during the previous twenty-four hours.
Wednesday, Quantum Economics founder and CEO Mati Greenspan humorously questioned on Twitter whether this was a “bullish rate rise.”
Speaking with Cointelegraph, Greenspan remarked that investors were unmistakably anticipating a decline and argued that the recent rebound is nothing out of the ordinary:
“Markets love going up on Fed days, even when their decision is tough. Powell is particularly skilled at delivering bad news, and investors were expecting worse.”
Attempts by the Fed to rein in inflation by boosting interest rates are typically accompanied by a decline in investment activity across markets.
However, the community is divided on whether the present rising momentum will be sufficient to continue or whether a significant reversal is likely before the market begins to recover completely.
Pav Hundal, an analyst at the Australian cryptocurrency exchange Swyftx, told Cointelegraph that the business was “surprised by the enthusiasm of the reaction to yesterday’s rate hike” because the underlying macroeconomic environment still seemed uncertain.
Whenever there are rate hikes, the markets appear to hear something different than what the Fed says. In June, the Fed suggested that significant rate rises would be “uncommon”; now, Jay Powell indicates that the rate of growth may “slow.”
“The best gauge of what’s to come is the underlying economic data, and for now at least, it does look like some inflationary pressures are easing, with gas prices falling alongside futures prices for staples like corn and wheat, as well as some shipping costs,” he said.
Hundal noted that Swyftx’s early trading increased by 100 percent in response to the announcement, demonstrating that “many individuals find value in the present market values.”
The expert added that a more significant bullish or negative trend would likely not emerge until the U.S. reveals critical statistics about its gross domestic product (GDP) performance in the coming days, indicating whether the country is officially in recession.
“The good news is we’re not going to have to wait too long to see what happens to the crypto market when any initial volatility washes out. The U.S. is about to release its GDP data, which will be a big stress test, and any negative sentiment here could wipe out recent gains.”
“But if the macro landscape starts to show signs of resilience, we could see the crypto market cap stabilize at the $1 trillion point and rally from there,” he said.
