Cryptocurrency Market Slides As Interest Rate Hikes Rumored

Months of Bitcoin growth disappeared on Wednesday as the Federal Reserve released its December meeting notes.

The notes showed growing worries over inflation numbers and the potential for interest rate hikes as early as Q2. The combination of inflation and lack of labor has pushed the department to consider early rate hikes.

Cryptocurrency followed tech stocks as their prices declined after the news was released. As interest rates go up, investment funds typically sell out of speculative markets and move into more stable markets. This has further pushed the theory that cryptocurrency markets are acting in a similar way to technology stocks.

Some major companies, like Visa, have announced they are still committed to moving forward on cryptocurrency markets despite the recent double digit percentage drops.

This commitment comes from recent findings that almost all banks are aware of cryptocurrencies and almost half of their customers stated they would move to a bank option for digital currency custody if the option was available.

Large cryptocurrency influencers and investment funds have recently stated that Bitcoin (BTC) and other digital assets are a way to hedge inflation which has spurred a lot of new interest. An increase of interest rates could reduce the inflation trajectory and keep investors from seeking volatile markets.

BTC dropped 7.2% in the 24 hours following the release of the meeting notes and is trading around $42,800 while other cryptocurrencies like Ethereum took a larger 11.9% drop.

Many market analysts have shown that this drop was fuelled by a large amount of leveraged trades being forced to close which sparked a sell off event. These leveraged traders believed the market would push upward again as some investment funds speculated that BTC would reach the six-figure mark this year.

Will interest rate increases cause cryptocurrency markets to go into a bear market? We want to know what your opinion is on the growing inflation problem and how cryptocurrencies tie into it. Let us know what you think on our social media!


Updated: 01/06/2022 — 14:00