With the Fed looking to raise interest rates in 2022, many investors are wondering what the impact could be for cryptocurrency.
This week’s FOMC meeting saw the Fed make moves that set them up to raise rates sooner rather than later, as they indicated they would cut back on their bond-buying program to $30 billion a month. “Economic developments and changes in the outlook warrant this evolution,” Jerome H. Powell, the Fed chair, said in an interview with the New York Times.
Bitcoin Holds Steady
While the Fed sets up a rate hike, the ECB has already implemented one. “The ECB has surprised the market with the relatively contained size of APP monthly purchases going forward, though there are dovish elements in its statement with respect to the reinvestments of the PEPP and the fact that it could be resumed,” said Jane Foley, head of FX strategy, at Rabobank in London. The BOE’s Monetary Policy Committee voted to increase the bank rate to .25%.
Bitcoin barely flinched upon the announcement, remaining around $48,700 in price – a marginal loss that indicates that the cryptocurrency is well-positioned to weather the storm that will come with a Fed rate hike.
“Despite bitcoin’s recent 39% correction, the number of addresses with a non-zero balance continues to break all-time highs,” said Marcus Sotiriou, an analyst at the U.K.-based digital asset broker GlobalBlock. He added, “This suggests institutional interest is prevalent at these prices and that whales are buying up Bitcoin supply during this correction.”
Gaining Bitcoin Exposure
Investors looking to gain exposure to spot bitcoin can find that in the Grayscale Bitcoin Trust (GBTC). Currently, there are no ETFs that track spots, and GBTC has the added advantage of giving investors exposure to Bitcoin as a security without the challenges of buying, storing, and protecting the Bitcoin directly.
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