Cryptocurrencies have been on the rise recently in anticipation of a pause in the Federal Reserve's interest rate hikes. The expectation is that the Federal Open Market Committee (FOMC) meeting next week will announce a halt to the rate hikes, with the Consumer Price Index (CPI) hitting 5% year-on-year. A break in the rate hikes is seen as beneficial for the crypto markets, with the price of Bitcoin (BTC) having surged by over 40% since the beginning of March when banks collapsed and talks of periods without rate hikes began.
Though such a move may be widely welcomed, some have argued that the markets have already priced in a Fed rate pause - the idea being that an official announcement of a pause in rate hikes might not bring significant further changes to the market. Evercore strategist Julian Emanuel highlighted the point, referring to an expected pause in 2023 being likely to be received as a ‘sell the news’ event.
The core idea here is that current markets may be expecting a rate pause, so the announcement itself may not lead to additional surges in Bitcoin or other cryptos. Other players in the market agree, with crypto influencer Shivam Chhuneja noting that investors were ‘not much risk-on in their approach’ prior to the announcement.
However, the long-term effects of a pause in the rate hikes could still be beneficial for cryptocurrencies in general. Gaurav Dahake, the Chief Executive Officer of BNS crypto exchange, commented that a pause might encourage investors to explore alternative assets such as crypto in order to search for higher returns, potentially leading to a future crypto bull run.
Overall, the crypto markets may have already priced in any effects of the FOMC’s rate pause, but it is still possible that medium to long-term outcomes could still be positive. Robert Reich, a professor of public policy, believes that the Fed should pause rate hikes in order to give the world a chance to catch up, while former Fed executive Claudia Sahm holds a similar view. Whether the FOMC’s meeting next week will ultimately result in a pause in rate hikes is yet to be seen, but until then, the crypto markets will remain on tenterhooks.
Ethan Garcia
- 2023-04-24
Will Crypto Markets Benefit from a Rate Hike Pause?
Cryptocurrencies have risen recently in anticipation of a pause in the Federal Reserve's interest rate hikes. Will the FOMC meeting next week result in a positive bull run for the crypto markets, or have they already priced in a rate pause?
