FOMC Meeting Outcomes and Their Impact on Economic Performance and the Future of Bitcoin
According to minutes from the Federal Reserve’s November meeting, officials are expecting to switch to smaller interest rate increases “soon.” This news comes as a relief to many who were worried that the Fed might continue to raise rates at a rapid pace. While interest rate hikes are necessary to keep inflation in check, too much too soon can harm the economy.
How Interest Rate Hikes Can Affect the Economy
Increases in the federal funds rate — the rate at which banks lend money to each other overnight — usually translate into higher borrowing costs for consumers and businesses. That can put a damper on economic activity, as people and companies are less likely to borrow money for big-ticket items like homes and vehicles when rates are high.
In addition, higher rates can cause the stock market to tumble, as investors sell off shares in anticipation of lower profits. That sells can have a ripple effect on the economy, as they can lead to layoffs and cuts in spending by companies. Moreover, as we have seen in 2021–22, the crypto market is getting increasingly correlated with the stock market and major indexes.
The Federal Reserve has raised rates three times this year and is widely expected to do so again in December. But if the minutes from the November meeting are any indication, it sounds like officials will be taking a more cautious approach going forward. And that’s good news for the economy.
How Does The Crypto Market Doing
The crypto market was facing another major sell-off this week, with Bitcoin (BTC) and most other major cryptocurrencies once again in the red. The cause of this latest drop can be traced back to the recent troubles of cryptocurrency exchange FTX, which has been embroiled in a scandal involving the alleged manipulation of Bitcoin prices.
The result is a perfect storm that has sent the crypto market tumbling lower. It remains to be seen how long this latest sell-off will last, but for now, it seems that the FTX contagion continues to spread, taking most of the market down with it.
As stated by b-cube.ai CEO on Twitter, although the current trend seems to be down, there is a possibility that Bitcoin will come back up to $18,200 — $18,500 in the short term. However, it is important to keep in mind that this rebound is likely to be only temporary. In the long run, it is still more likely that the value of Bitcoin will continue to decline. For this reason, investors who are considering buying Bitcoin should exercise caution and only invest an amount that they are willing to lose.
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