Crypto markets react differently to same fed rate decisions

The latest health analysis shows that cryptographic markets have historically reacted unpredictably to interest rate decisions of the Federal Reserve.

In a March 20 jobThe contributor of Santiment Brian noted that if certain Fed decisions trigger rallies, others lead to a clear drop despite similar political results. This scheme has been in place since the Fed began to significantly increase interest rates in 2022 to fight against inflation in the arrow. The central bank increased rates from almost zero in March to 4.50% in December while inflation reached a 40 -year higher year 9.1%.

The financial markets were shaken by this change, and the actions and cryptocurrencies have experienced strong drops. At the end of 2022, Bitcoin had fallen below $ 16,000, against his peak of $ 69,000 at the end of 2021. Liquidity has tightened and borrowing costs increased, injuring risk assets everywhere.

Since then, the cryptography market has remained very sensitive to Fed policy. Bitcoin jumped more than $ 72,000 in March 2024 when the Fed held stable rates, but it fell sharply the following month. A similar break in May led to an instant recovery, but a July decision caused a 20% bitcoin before stabilizing.

When the Fed reduced interest rates for the first time last year in September, it sparked a solid rally. In November, a pro-Crypto electoral result and another rate drop sent Bitcoin to the summits of all time. But the market lost steam when the Fed maintained the unchanged prices in December, leading to a correction.

The last meeting of the Federal Market Committee opened on March 19 maintained the rates of 4.25% to 4.50% as expected. Santiment noted that social discussions around the decision were lower than during past meetings, which suggests that traders had already assessed it.

However, the market reacted positively. Bitcoin (BTC) increased by 4.5% to $ 85,786, briefly reaching $ 87,431, while Ethereum (Ethn) and Solana (GROUND) posted 4% and 6% gains. The total market capitalization of cryptography has climbed 2% to 2.91 billions of dollars, and the term markets saw $ 355 million in liquidations, mainly from short positions.

The president of the FED, Jerome Powell, confirmed that two rate drops are still expected this year. However, there are still concerns inflation and slow down economic growth. Since historical responses indicate that initial movements can be misleading, it is not yet clear if the market will maintain its recent gains.