The FED has increased interest rates by a quarter point as it battles high inflation rates while addressing the risks to financial stability. Over the last few days, a number of analysts had already anticipated the increase despite the uncertainty in the US banking sector. The recent increase took the interest rates from 4.75% to 5%, and marks the ninth consecutive increase by the policymakers. Similarly, the increase clearly highlights the importance of restoring overall price stability.
It is true that the shortcomings in the banking sector have led to increased fear regarding future financial failures. The fallout of high-level banks, like SVB and Signature has caused a major setback to the financial sector.
The FED chair Jerome Powell stated
“The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation. The extent of these effects is uncertain.”
What is Next for the Interest Rates?
It was previously indicated that interest rates might shift higher and stay at that mark for extended periods of time. However, the current financial conditions might suggest a lesser need to hold these rates higher to bring down inflation rates and control the economy.
Powell further stated,
“In assessing the need for further hikes, we’ll be focused on incoming data and the evolving outlook, and in particular on our assessment of the actual and expected effects of credit tightening.”
The response of the market was the opposite in comparison to what was previously seen. Back then, the market listened to what the FED had to say, and no visible effects were seen on the trading prices of different cryptos. However, now, cryptocurrencies have faced another setback.
The Decision by the FED Impacts Crypto Prices Adversely
The total crypto market cap has consolidated by 1.21% to reach $1.16 trillion. Therefore, a number of cryptocurrencies were also affected by the increase in interest rates. Some of the most prominent ones are as follow:
- Bitcoin (BTC): The token was faring well in the market in the past few day as it managed to cross the $28k mark. However, the situation has changed following the actions of the FED. At the time of writing, BTC is trading for $27,668 following a 1.47% decline in the previous 24 hours. Furthermore, the total market cap of the token is approximately $535 billion.
- Ethereum (ETH): Just like BTC, ETH was seen to be trading in the green previously, as the leading altcoin was seen crossing the $1,800 mark. Currently, the decline of 1.91% since the previous 24 hours have pushed the trading price down to $1,745.
- Solana (SOL): SOL has been on the decline for a while now, and the current chain of events doesn’t help its case under any circumstances. Currently, SOL suffered a 2.07% decline and is now trading for approximately $21.74.
- Cardano (ADA): It is fairly easy to see that ADA has fared well in comparison to other cryptos in the market. ADA experienced a decline by merely 0.08%, and still stays strong by trading for almost $0.3722.
- Ripple (XRP): The best performing crypto token of last week, XRP has also suffered in the market. It is currently at around $0.443, however, the price of the token is heavily dependent on the developments of the case between Ripple and the SEC.
- Dogecoin (DOGE): The meme coin dropped by 0.56% in the last 24 hours, and is currently trading for approximately $0.07524.