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Crypto Market Dips as Fed Suggests Higher Than Expected Rate Hikes

Posted on 8. March 2023

• The crypto market is down today as the Federal Reserve suggests that its next interest rate hike could exceed market consensus.
• This follows a sharp pullback seen in the U.S. stock market after Fed chair Jerome Powell issued concerning statements about inflation and interest rates.
• Market participants are expecting a higher than 50% probability of a 50 basis point hike by the March 21 to March 22 meeting.

Crypto Market Pulls Back After Hawkish Fed Remarks

The crypto market is down today, following a sharp pullback seen in the U.S. stock market after United States Federal Reserve chair Jerome Powell issued concerning statements about inflation and interest rates.

Price Level Concerns for Bitcoin & Ether

Bitcoin (BTC) price currently trades at $22,300, a concerning level for traders who believe a dip below the $22,000 level would trigger a trend reversal down to $19,000. Similar worries also exist for Ether (ETH), which currently trades at $1,555 and has a key support level at $1,450.

Fed’s Monetary Policy & Interest Rates Key to Crypto & Stock Performance

Cryptocurrency markets are no stranger to volatility, and generally sharp price moves are seen ahead of the release of key economic data reports and the Federal Reserve’s announcement on monetary policy and interest rate hikes.

Powell Suggests Higher-Than-Expected Inflation Data

On March 7, Fed chair Powell suggested that economic data from Feb. could show a higher-than-expected uptick in inflation.”The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.” Powell added that: “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

Market Expecting 50 Basis Point Hike By FOMC Meeting

Following these statements, the DOW and S&P 500 dropped by 1.18% and 1.08%, while BTC pulled back to $21,927. The expected response to a hot inflation report is a higher-than-expected rate hike on March 22 when the FOMC concludes and Powell issues his guidance on the economy to explain size of rate hike increase. Prior to today’s statement, there was an expectation of 0.25% rate hike with target range 4.75% – 5%. However CME Group data showed more than 50% probability of 50 basis point hike by March 21 – 22 meeting.

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