Today at 21:00 Moscow time, a meeting of the US Federal Reserve will take place, at which a decision will be made on changing the base interest rate.
Impact on the cryptocurrency market
The fact is that raising or lowering the interest rate affects liquidity. If the rate is raised, liquidity in the market decreases. That is, investors invest more in stable assets.
But if the rate decreases, liquidity increases. Accordingly, more free money appears on the market, and investors are ready to invest in more risky assets.
Before a meeting in the US futures market, there is always some expectation. The market is waiting for a specific decision on how many points the rate will change. This time, most of the market lays down the rate increase by 0.75%. This is not an accurate forecast, but these indicators guide the markets. However, a deviation from the forecast can always occur, and further, we will analyze how the markets will behave in such a case.
How will the market react?
There are three scenarios for the development of events, and we will analyze how the market will react to each of them.
- Interest rate 2.25 – 2.5% (+0.5-0.75) – market expectations came true, and the market situation, including cryptocurrencies, will not be significantly affected.
- The interest rate is 2.5-2.75% (+0.75-1) – the rate increase turned out to be higher than the market expected – in this case, the cryptocurrency market is likely to fall, and bitcoin can break through the $19,000 mark and fall even lower.
- Interest rate <2.25% – The Fed will either leave the rate unchanged or increase it by no more than 0.5%. Market expectations, in this case, are pessimistic. The possible positive reaction of the markets. The cryptocurrency market may react with growth; the bitcoin rate will likely exceed $22,000.
Practice shows that the market reacts to the outcome of the Fed meeting immediately after the news. Therefore, we will watch the market movement tonight.
What else can affect?
The US GDP report for the second quarter of 2022 comes out tomorrow. The second consecutive negative value in terms of economic growth may indicate a long-term recession in the market, which is likely to affect the cryptocurrency as a whole negatively.
Also, reports of such prominent companies as Apple and Amazon will be published tomorrow. They are among the significant companies in the stock market, which in turn has a significant impact on the cryptocurrency market.