Home Cryptocurrency Bitcoin Floundering as Rate Hikes / Cuts Affect ‘Risk Assets’ – Weekend Roundup

Bitcoin Floundering as Rate Hikes / Cuts Affect ‘Risk Assets’ – Weekend Roundup

by Serge Shlykov

Bitcoin has seen a dramatic price decline over the last 15 days, as it continues to struggle with having staying power in the current market.

Bitcoin is losing value and taking its market capitalization with it. Though this may be a sign of the digital asset’s global dominance, experts caution that we are in for a murky future as cryptocurrency investment trends switch over to more liquid assets like gold.

Bitcoin has been struggling this week as the price of Bitcoin has dropped below $7,000. The cryptocurrency is also being hit by a number of other factors including increased regulatory scrutiny and the recent announcement from Amazon that it will no longer accept Bitcoin for purchases.

The digital asset markets are now in a state of flux, since anxieties that arose after the emergence of the Omicron version have not subsided. The following are a few recent occurrences that might have an impact on markets in the future.

Rate Increases / Cuts

When it comes to how Bitcoin and the larger digital asset market respond to news, there isn’t always a rhyme or reason. When interest rates are low, ‘risky’ investments flourish because borrowing costs are cut and spending is encouraged. When interest rates are increased, on the other hand, investors often exit from such assets.

Despite the fact that these incidents occurred within the last week in two of the world’s most powerful countries, Bitcoin reacted in an unexpected way. Bitcoin surged in reaction to the US Federal Reserve’s reduction of stimulus, while falling in response to China’s intensified stimulus measures.

The United States is on the rise.

Governor Christopher Waller of the Federal Reserve announced the government’s approach to combat runaway inflation on the 17th. Inflation has been consistently reaching and exceeding record levels for some time now, believed to be the outcome of almost a year of constant’stimulus.’ The Federal Reserve plans to ‘wind down’ its asset purchases and begin increasing interest rates sooner rather than later in the future.

“Turning to inflation, it is frighteningly high, persistent, and has expanded to touch more categories of goods and services than earlier this year,” Governor Waller said. Wages are increasing, and in the Fed’s Beige Book, company contacts say that they feel comfortable passing on increases in input prices to their consumers. I’ve maintained for a long time that there are upside risks to inflation, and with inflation consistently above the FOMC’s 2% objective, I fully backed the Committee’s decision this week to accelerate the pace of asset purchases.”

China is in a downward spiral.

While the US has stated its intention to reduce its stimulus spending, China has recently declared a step in the exact other direction. China has dropped its primary interest rate to 3.8 percent for the first time in over two years, in reaction to the country’s struggling retail and housing sectors.

Metrics & Market Reactions

Looking at recent market action, a clear rising movement happened after the Federal Reserve stated its intentions on the 17th. As Asian markets began on Monday, they faced further negative pressure from news of China’s rate decrease, which continued mildly over the weekend. BTC looks to have settled at $46,000 at the time of writing.

Bitcoin Floundering as Rate Hikes / Cuts Affect ‘Risk Assets’ – Weekend Roundup

Beyond the price of Bitcoin, the famous ‘Dread & Greed Index’ shows that general market sentiment is still based in ‘severe fear,’ with a score of 25 – a far cry from the previous high of 84 on November 9th.

Bitcoin Floundering as Rate Hikes / Cuts Affect ‘Risk Assets’ – Weekend Roundup

If Bitcoin has taught us anything, it is that no one can predict what will happen in the future. Will there be a surge in digital assets by the end of the year? Maybe. Will they continue to deteriorate in a gradual and painful manner? Perhaps as well.

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Bitcoin has been floundering as the rate hikes and cuts affect risk assets. One of the biggest changes is that the premium for Bitcoin Cash has come back. Reference: will gbtc premium come back.

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