The overcast crypto market is feeling hopeful, because the Fed is projected to raise interest rates even more aggressively, which is 75 basis points on Wednesday.
The quite aggressive increase was projected by Goldman Sachs on Tuesday (14/6/2022), because inflation in the US turned out to be much higher than imagined. Unmitigated, inflation year-on-year as of May 2022 it reached 8.6 percent. That is the highest for the last 41 years in the same period.
Even Goldman Sachs warns that such aggressive policies and more until the end of this year, could lead the United States into another recession.
“The projected increase in interest rates and an impact on the decline in financial markets, implies that there is a chance for a recession to emerge. We project a 75 basis point increase in June and July, followed by a 50 increase point base in September and a 25 basis point increase in November and December,” said Hatzius of Goldman Sachs Business Insider.
Another source, as of Tuesday morning, on the page FedWatch CME Group, traders projecting there is a 100 percent chance there is an increase of 75 basis points at the meeting The Fed on Wednesday (15/6/2022). That was higher than last week’s forecast by just 50 basis points.
“There’s a lot that depends on the Fed’s policy update tomorrow,” said Russ Mold, director of investment at AJ Bell. Investors appear increasingly afraid the central bank will become more aggressive with interest rates to try and curb inflation, given May’s cost of living figure was higher than expected.” Forbes.
Although it is still a projection, this speculative view is capable of driving extreme sell-offs in the stock and crypto markets.
The crypto market, for example, fell below $1 trillion on Tuesday. Bitcoin, as the number one cryptocurrency even fell to US$20,855.
The price is equivalent to the fall of 2020, 2018 and 2015 based on the 200 Moving Average (MA) indicator on the weekly chart.
While the stock market in the US, based on data S&P500had weakened 8.47 percent in the last 5 days, from 4,100 to 3,750.
Crypto market investors and traders in particular seem to have to stop hoping for high gains any time soon. The reason is, the crypto market today is much different from a few years ago.
Currently, for the first time the crypto market is in a macroeconomic situation where the Fed is dealing with high inflation through quantitative tightening which has resulted in a significant strengthening of the dollar (DXY value is already above 105). This was unprecedented, even when Bitcoin was designed in 2008 and launched in 2009. [ps]
