Cryptocurrencies were seeing some volatility amid important interest rate decisions from the US Federal Reserve and the European Central Bank. The crypto market has also been reacting to the developments in the US banking sector as traders consider the potential direction for digital assets.
The Federal Reserve’s interest rate hike yesterday could add more pressure on cryptocurrencies over the short term as some investors turn to more caution and as safer assets like treasury become more appealing. The rapid monetary policy tightening has affected a number of investors and has nurtured a more cautious approach in many cases.
Denys Peleshok, Head of Asia at CPT Markets said, “The elevated interest rate levels could also push the US economy towards a recession, which could in turn influence decision-making among investors in the country, leaving crypto assets with less support.
“However, over the medium term, crypto markets could benefit from the expected pause and eventual decline in interest rates. The Federal Reserve’s changing rhetoric could fuel more risk-taking eventually.
“In addition, the continuing issues in the banking sector could fuel concerns about traditional finance’s ability to withstand financial shocks and could push more investors toward digital assets. The crypto market has already benefited from a surge in inflows during previous bank failures this year and could continue to do so if new collapses emerge.
“In the meantime, bitcoin remains range-bound with uncertainties piling up. However, current conditions could play in favor of the largest cryptocurrency as it could be able to maintain and increase its market dominance compared to other digital assets.
“Ethereum and some others could continue to see prices recover to a certain extent under current conditions but could see some investors move toward bitcoin in search of relative safety.”