- It was announced that the Federal Reserve will be increasing interest rates in March.
- Cryptocurrency and stock markets have experienced a downturn in reaction.
- Bitcoin and Ethereum have both dropped by 3.15% and 5.25% respectively.
The Federal Open Market Committee (FOMC) held a two-day meeting and on Wednesday, Federal Reserve Chairman Jerome Powell announced the country’s monetary policy plans. Powell stated that asset purchases would be stopped in March and postponed plans to raise interest rates for the time being.
Prior to the press conference, the markets were very bullish with the price of Bitcoin reaching a peak of $38,740. However, the markets started to take a downturn about half an hour after the briefing and have stayed on a downward trend since then.
At the moment, CoinMarketCap shows BTC to be down 3.15% in the past 24 hours, trading at $36,820, while Ethereum is down 5.25% and currently stands at $2480.
Stocks that are correlated with Bitcoin went up and down before and during the meeting.
Raising Rates Led To The Decline
The markets reacted negatively to the news that the Federal Reserve was planning to increase interest rates close to zero in March, in order to combat the rising inflation rate.
Powell declared, “I would say that the committee intends to raise the fed funds rate at the March meeting, assuming the conditions are right to do so.” This announcement is not new – the Fed had already published their Tapering Plan, End Asset Purchases and Rate Decision.
As inflation is currently at an all-time high and the Fed hopes to reach their 2% target, the central bank believes that increasing benchmark rates will help to prevent prices from continuing to rise.
Altcoin Performance Affected As Well
In addition to Bitcoin and Ethereum, altcoins have also seen a decrease in prices due to the Fed announcement. The 10 largest crypto assets according to market capitalization have all been affected, with Solana trading at $92.6, 8.3% lower than 24 hours ago.
Terra’s LUNA is now below the $60 threshold, while Polygon’s MATIC has dropped by 2.7% and Cardano (ADA) is trading at $1.07 despite barely holding the $1.05 support.
