2021-12-16 08:28:53

Bitcoin And Ethereum Ignore Hawkish Fed

Crypto Traders Are Not Worried About Higher Rates In 2022

The dynamics of leading cryptocurrencies like Bitcoin or Ethereum are impacted by general risk appetite. In a financial world driven by liquidity, the risk appetite greatly depends on the actions from the world’s main central bank, the U.S. Federal Reserve.

Yesterday, the Fed left the interest rate unchanged, in line with the analyst consensus. At the same time, the Fed announced that it reduce its asset purchase program by $30 billion per month, which means that it may begin to raise rates in the second quarter of 2022. Interestingly, Fed’s median forecast for 2022 Federal funds rate is 0.9%, which indicates that the central bank expects three rate hikes next year.

Higher rates are typically bearish for riskier assets, and cryptocurrencies have recently become a symbol of high risk (and high reward) among financial professionals.

In this light, the recent announcements from the Fed may be viewed as bearish for leading coins. However, the market’s reaction was bullish, and Bitcoin and Ethereum gained upside momentum after the release of Fed’s statement. These moves show that traders do not see the rapid reduction of Fed’s asset purchase program and higher rates as significant threats to leading cryptocurrencies.

Key Indicators To Watch For Crypto Traders

The world’s biggest cryptocurrencies no longer belong strictly to crypto enthusiasts – they can be found in portfolios of many traditional investors. In this light, crypto traders who are interested in Bitcoin and Ethereum would benefit from watching the traditional “safe-haven trio” – the U.S. dollar, the U.S. Treasuries, and gold.

After the Fed Decision, U.S. dollar moved lower against a basket of currencies while longer-dated Treasury yields remained mostly unchanged. Meanwhile, gold continued to trade near the $1775 level. There are no indications of rising demand for safe-haven assets, which is bullish for riskier assets like cryptocurrencies.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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