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What Impact Can Upcoming Fed Rate Release Have on Crypto Markets?

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This week is expected to witness a decent spike in volatility across all the asset classes as the US Federal Reserve is scheduled to release its interest rate and inflation rate data on Wednesday, June 12. It will conduct a press release following the release of the data, as per the economic calendar from Investing.com and Trading Economics.

Historical US Interest Rate Release and Crypto Market Reaction

This section of the article considers the reaction of the crypto market when the interest rate data is released over a 12-month period. 

Date of Data ReleaseForecast for Interest RateActual Interest RateChange in BTCChange in ETH
May 1, 20245.5%5.5%-3.88%-1.44%
Mar 20, 20245.5%5.5%+9.58%+11.26%
Jan 31, 20245.5%5.5%-0.84%-2.56%
Dec 13, 20235.5%5.5%+3.32%+2.57%
Nov 1, 20235.5%5.5%+2.25%+1.76%
Sep 20, 20235.5%5.5%-0.33%-1.28%
July 26, 20235.5%5.5%+0.41%+0.77%

Source: Interest rate data is taken from Investing.com, and percentage change is taken from tradingview.com

After assessing the table given above, it can be inferred that no clear relationship can be drawn from this data. Assets can move in any direction despite expectations that the interest rate matches the actual results and that the interest rate has been flat for the last year.

However, the above graph shows that Bitcoin and Ethereum react similarly to the data release.

Moreover, it is perceived that interest rates experience a negative correlation with riskier asset classes like cryptos. Lower interest rates are believed to attract investments in riskier asset classes like cryptos. Besides, an increase in higher interest rates can have the opposite impact. Yet, the expected flattish interest rate in June 2024 does not specify a clear direction.

The interest rate does not solely drive the price change stated above. Several other macro and microeconomic factors impact cryptocurrencies’ prices. 

Rate of Inflation and Cryptocurrencies

In addition to interest rate data, the US inflation rate will also be released on June 12. On May 13, 2024, inflation data reported an increase of 0.3% after standing at 3% since January 2024. 

There are no precise forecasts for the inflation rate, but it is expected to stay well above the target rate of 2%. This higher inflation can increase demand for cryptocurrencies, increasing the prices of famous cryptocurrencies. 

Cryptocurrencies are considered a good hedge against rising inflation, as in 2023, the inflation rates were reaching their target, but the trend is expected to experience a reversal based on the May data report.

The trend is shown in the chart below.

Source: Investing.com

Market Reaction

At the time of writing, Bitcoin can sustain above $69,000, experiencing a flat chart and a red candle. Bitcoin is expected to sustain over $69,000 until the Fed releases its data.

Disclaimer

The analysis given above is for informational and educational purposes only. You should not take it as financial, investment, or other advice. Investing in or trading crypto assets is risky. Please consider your circumstances and risk profile before making any investment decisions.

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