After the US Federal Reserve (FED) raised interest rates by 25 basis points, the bitcoin price rose slightly to $29,000.
In last night’s announcement, Fed increased the federal funds target range rate by 25 basis points to 5 – 5.25%. The Fed’s decision to raise interest rates yesterday, was largely predicted by analysts.
“In determining the extent to which additional policy consolidation may be appropriate to return inflation to 2% over time, the Committee will take into account cumulative monetary policy tightening, the lag that Monetary policy affects economic activity and inflation, and the economic impact and financial development,” the Fed said.
“The Committee anticipates that some additional policy consolidation may be appropriate to achieve a sufficiently restrictive monetary policy stance to bring inflation back to 2%,” the Fed added.
“The one and done is the prediction of Fed policy based on pricing of US interest rate futures contracts,” said Trakx analyst Ryan Shea. That means today’s 25 basis point rally will mark the end of the most aggressive US monetary tightening cycle in 40 years.”
“Given the ongoing tension in the banking sector in the US, investors are anticipating a fairly rapid reversal in Fed policy,” he added. According to CME’s FedWatch, there is an almost 82% chance of a pause in rate hikes at the next meeting in June.
The price of bitcoin rose slightly on the news, now trading at $29,072, up 1.1% over the past 24 hours.
Bitcoin has been subject to strong price volatility over the past four months as market liquidity hits new lows. Liquidity refers to the depth of the market or the ability of buyers and sellers to execute transactions close to the market price.
Talk about the current situation. “The market currently lacks direction and the biggest obstacle for cryptocurrencies remains the US dollar,” said digital asset trading firm QCP Capital.
“For USD (DXY), the key to the top is 102.5, where we expect a break higher to lead to a sharp correction lower in the crypto,” according to QCP Capital.
The dollar tends to strengthen when the Fed raises interest rates. DXY is currently trading around 101.25, having dropped to 101.08 following the announcement, according to data from TradingView.
See also: Biden administration still wants a 30% tax on Bitcoin miners