The Federal Reserve’s Interest Rate Announcement: What It Means for Bitcoin
The Federal Open Markets Committee (FOMC) is set to make its policy interest rate announcement on Wednesday, and analysts predict that the rate will remain unchanged. According to the CME FedWatch tool, investors have priced in a 99% likelihood of a flat rate. This is good news for Bitcoin, as its price has historically correlated with risk equities and central bank policy. When credit conditions are favorable in the economy, Bitcoin tends to experience a price increase.
Why a Flat Rate is Preferred
Wharton Finance Professor Jeremy Siegel believes that the Fed should not raise rates at this time. He argues that any further hikes could have detrimental effects on employment and only marginally impact inflation. Siegel’s stance is different from his position last year when he advocated for rate hikes to defend the dollar. Based on current economic data, he predicts a strong stock market for the next few months.
Bullish Outlook for Bitcoin
Bitcoin experienced significant price gains from March 2020 to early 2021 after the Federal Reserve lowered its benchmark interest rate to 0.25%. Crypto trader Sem Agterberg, also known as Crypto Rover on Twitter, believes that a 0% rate increase could be bullish for Bitcoin. The correlation between central bank policy and Bitcoin’s performance suggests that a flat interest rate announcement may lead to positive price movement in the cryptocurrency market.
Hot Take: The Impact of Fed Policy on Bitcoin
As the Federal Reserve prepares to announce its policy interest rate decision, all eyes are on how it will affect Bitcoin. A flat rate announcement is expected, which could be beneficial for the cryptocurrency. Historically, Bitcoin has shown a correlation with risk equities and central bank policy. Therefore, if credit conditions remain favorable in the economy, Bitcoin is likely to experience a price increase. This aligns with the beliefs of experts like Wharton Finance Professor Jeremy Siegel and crypto trader Sem Agterberg, who anticipate positive market trends for Bitcoin in response to a 0% rate increase.
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