The US Federal Reserve Hikes Rates. What This Means for Forex and Crypto Markets
US Federal Reserve Hikes Rates
"USD - Federal Funds Rate - Increased from 1.50% to 1.75% as expected."
Well there we go. Another Fed rate hike in the books. Things under Jerome Powell seem to be functioning under normal service.
The US Federal reserved delivered another 0.25% rate hike, pushing things up to 1.75%. They also delivered a well rounded accompanying statement, signalling the likely continuation of rate hikes toward their target of somewhere in the capacity of 4 this year.
The Fed statement highlighted the stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2% inflation.
The now infamous, well depending on who you ask, dot plot continues to indicate that more rate hikes are likely to occur sooner rather than later. Powell even said "2.7% might be the median, but it doesn't say what we think is possible.”
Interestingly hawkish!
Tariffs? What tariffs?
How did Forex Markets React?
Forex markets reacted by dumping the US Dollar. Yep, throw your textbooks out the window again because markets don't work the way that they will tell you that they do.
This reaction to sell the USD was of course because the market had already positioned itself higher, expecting a more hawkish reaction than they got. I'm personally not really sure how much more hawkish they could have been, but that's market positioning for you.
I'll go over some charts later on Twitter, but the majors seem to be retracing their initial moves and have come back to settle at some sort of fair value where we started the day.
I hope you didn't burn the textbooks too badly after all!
What a Fed Rate Hike Means for Crypto Markets
I was sort of shocked to read some analyst opinions stating that they think the Fed raising rates will have a negative impact on crypto markets, because it will behave the same as the stock market.
Umm, I don't understand that line of thinking at all and believe that in the long run at least, there will be a negative correlation between the stock market and cryptocurrency assets.
Crypto is a relative safe haven and doesn't rely on free money flowing in to prop up prices like we've seen in stocks. The stock market cleanout is coming just as soon as it's realised that the free money party is over and these rate hikes are pushing us one step closer to this fact.
It's in fact still uncertainty around regulation that has been a much bigger factor in the price of crypto markets than interest rate expectations and pricing have.
Best of probabilities to you.
Peace ✌🏻.
Instagram: @forexbrokr
Website: www.forexbrokr.com
I think Crypto is really insulated from most major economic catalysts that affect the stock market. The crypto market just doesn't have the integration the stock market does where everyone is a market participant either directly or indirectly (retirement funds). Most crypto investors aren't basing their decisions off economics , market data and other indicators but rather perceived future value of the currency. 'Value' is probably not correct as we can't really work out an intrinsic value if something with no cash flow so perhaps adoption is a better word.
There are so many differing views on he correlation between crypto and stocks. I’m pretty much of the view that they’re negatively correlated or will end up negatively correlated when crypto matures a bit more.
They are finally doing what they should have done a long time ago, we need the higher interest rates in the U.S. to encourage savers. All of the cheap money that people took over the last 2 decades or longer has contributed (along with continuous imperial conquests) to the destruction of the country and decline in manufactured products. Tariffs though, prove those in charge are still inept in grasping economic law.
Yeah but can the Economy handle the higher rates? That’s my concern. With the IS leading global policy, you’ll have an effect on Australia too and I don’t even think we can handle them.
If shit hits the fan, and this trade war bullshit could well be the straw that broke the camel’s back, then crypto is poised to capitalise.
It could potentially be the final straw, no doubt. However, by prolonging the agony they're doing everyone a major disservice and a much steeper and worse correction will occur later. Like hyperinflation and bread lines. If the economy is already sick, we can't keep giving it the same exacts drugs that have made it sick, we need to detox the economy just like a drug user needs to detox. The detox is raising rates and stopping the printing and inflation.
Good analysis, it is my view also that rate hikes will effect stock markets negatively much more than crypto markets, if anything, as money flows away from stocks I see perhaps a small percentage of it flowing into crypto. Many investors and speculators are curious about the crypto market and only a very small percentage of the money from the stock market can move the crypto market in big ways, perhaps we are already seeing some of that in the greenwards movement the last couple of days in the crypto space? That concerns stocks and digital assets with use cases, in regards to cryptocurrency I also see the currency coins doing well as I think with rate rises this time around with the sheer volume of debt and the impending interest to be paid on Trumps Twenny Trill, we will see the US Dollar weakening as the global community loses faith in the once mighty Dollar. There is a whole host of other problems the Dollar is coming up against with China finally providing an alternative... yes, it's going to take time with the Dollar being so entrenched for so long but it's happened before with every reserve currency, it will be death by a thousand cuts. It's just a matter of time.
I like this a lot man.
👌🏻.
For most of my life, I've never thought about money. I've spent the last decade writing, fiction mostly. It hasn't made me any money, yet it's what I love. Recently, however, a friend introduced me to crypto. I bought some, enjoyed it, started to read about blockchain and what not...and now really enjoy it. That's how I found out about Steemit.
Anyways, for someone such as myself, the novice that I am, these articles are greatly appreciated. Keep it up. Also, I have a question.
Why specifically would the stock market not impact crypto? In regards to human nature-I'm sure there are many crypto traders who are market trading as well-wouldn't the trend be that if the markets are bearish, crypto would follow. Shouldn't there be some connection?
There is a connection between all markets, and stocks to crypto is no different, yes. But what I’m saying is that the correlation between these 2 might be inverse instead.
For example, when money sell out of stocks because conditions are deemed risky, it flows into safe assets such as bonds or gold. These markets having an inverse relationship with stocks as a result.
We don’t yet know what the relationship with crypto actually is, because since crypto has come into the public eye, stocks haven’t turned bearish. That’s why it’s so interesting to see if crypto does in fact act like ‘digital gold’ and act as a safe haven or not.
Yeah, I just read an article on coindesk explaining the digital gold aspect of bitcoin. This, in relation to your explanation, has proved to be quite educational. Thank you.
Well done
but its just analysis and an oppinion
but a good :)
Keep it up !
Just my opinion indeed. Thanks for the comment mate.
this raise hike will impact those that are heavily in debt most of which are in the stock market rather than the cryptos.and i totally agree that it is the regulations that will affect cryptos the most.
I’m in Australia and as rates eventually start to rise here, we’ll see housing debt starting to be unpaid too.
I just think shit is waiting to hit the fan within the global system and crypto is poised to capitalise.
Thanks for the info. I was wondering how the FED rate hikes would affect the price of BitCoin, looking for an article about the topic, and found yours! Upvoted and Resteemed.
Glad my article could fill that little niche content void!
Thanks for sharing the post and I'll see you around :)
I don't think FED behavior will matter too much. The only real issue would be that the cost of paying back credit that people used to buy crypto will rise but I doubt it will happen quickly.
When higher rates start to bite and it draws real money out of stocks, crypto will benefit.
The Fed matters a lot.
really its a informative post.people will benifitaed from this.good job
Thanks mate. The only way to grow this platform is to continue to publish unique, quality content that people want to return to read.
I hope you're contributing to this goal too.
Yeah nice thoughts sir. Using these kind of platforms with good output really makes us to work hard to earn money. And by blogging your visions and thoughts leaves positivity behind which is very helpful like you are doing the right thing
Thank you... I think. Just trying to continue to publish quality, original content to grow the Steemit platform.
We've all gotta do our part!