FOMC Decision Triggers $400 Million Crypto Sell-Off

FOMC Decision Triggers $400 Million Crypto Sell-Off

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By Jakub Lazurek

13 Jun 2024 (about 1 month ago)

3 min read

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The FOMC's decision to keep interest rates steady caused a $400 million crypto sell-off, shaking investor confidence and dropping Bitcoin and Ethereum prices

The Federal Open Market Committee (FOMC) held its fourth policy meeting of the year on June 12, deciding to keep interest rates steady at 5.25% to 5.5%. This unexpected decision caused significant turmoil in the crypto market, leading to sharp declines in Bitcoin and Ethereum.

The FOMC’s decision not to cut rates, despite previous hints, created immediate volatility in the crypto market. Bitcoin's price plummeted from $70,000 to $66,000, and Ethereum experienced a similar fall. This resulted in nearly $400 million in liquidations, showing high investor anxiety.

Federal Reserve Chair Jerome Powell emphasized the progress in fighting inflation but maintained a cautious approach, indicating that “considerable progress” has been made but it’s not yet time to relax monetary policy. Powell’s commitment to a 2% inflation target suggests that premature rate cuts could undo the progress.

The FOMC’s announcement and Powell’s remarks had a swift and dramatic effect on crypto markets. Bitcoin dropped from $70,500 to $67,220, and Ethereum fell from over $3,700 to $3,400. Altcoins like Cardano, Solana, and Ripple also saw declines of at least 8%.

Nearly $400 million worth of crypto assets were liquidated in the past two days, highlighting market instability. US spot Bitcoin ETFs saw net outflows of $200 million, ending a 19-day streak of net inflows.

Despite a brief boost in confidence after the US Consumer Price Index (CPI) report showed a year-over-year inflation rate of 3.3% for May, slightly below the expected 3.4%, the crypto market quickly returned to previous levels. This underscores the persistent lack of investor confidence amid ongoing economic uncertainty.

While the US sticks to its firm stance against premature rate cuts, other regions like the European Union and Canada are taking different approaches, opting for rate cuts this year. These varying strategies reflect different economic conditions and policy choices worldwide.

In the US, a Grayscale-backed survey revealed that 41% of voters are paying more attention to Bitcoin due to persistent inflation. This growing interest in cryptocurrencies highlights the increasing scrutiny of traditional economic policies and the search for alternative investments in a high-inflation environment.

The FOMC’s decision to hold interest rates steady has sparked major volatility in the crypto market, leading to significant liquidations and shaken investor confidence. Bitcoin, Ethereum, and other altcoins saw sharp declines, showing the market's sensitivity to Federal Reserve policies.

As global economic strategies diverge, the US remains committed to combating inflation without easing monetary policy too soon. This cautious approach underscores the Federal Reserve's focus on stabilizing the economy, even if it causes short-term market fluctuations.

The crypto market remains highly reactive to economic indicators and policy decisions, with investors watching closely for any changes in the Federal Reserve’s stance and global economic trends that could affect digital assets. The ongoing economic uncertainty and varying approaches to inflation management create a complex landscape for investors. With increasing public interest in cryptocurrencies as a hedge against inflation, the crypto market will likely stay a key focus in the broader economic narrative.

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