According to crypto market analysis firm Blofin Academy, the Federal Reserve’s (Fed) upcoming rate hike could pose the next big challenge for Bitcoin.
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The US economy has shown considerable resilience in recent months, prompting the Fed to consider raising interest rates to contain inflation.
However, this could be bad news for the crypto market, as higher interest rates tend to make traditional investments more attractive, leading to a decrease in demand for Bitcoin and other currencies. other electronics.
The correlation between interest rates and Bitcoin’s price action has been observed in the past. As interest rates rise, investors tend to move their money into traditional investment vehicles such as stocks and bonds, leading to a decrease in demand for cryptocurrencies.
However, it is worth noting that Bitcoin is often considered a hedge against inflation, which means that it can still attract investors in times of economic uncertainty.
The Fed’s next scheduled meeting is on June 14, 2023, at which point the central bank will likely discuss the possibility of rate hikes in response to the current state of the economy. America.
Noelle Acheson, the owner of the “Crypto Is Macro Now” newsletter, has warned about investors pouring money into the crypto market at this time. While Bitcoin’s upside potential is still substantial, Acheson suggests that there is currently no compelling reason for investors to take on additional risk.
According to Acheson, there are currently few macro determinants, such as debt limit negotiations and the Fed’s interest rate policy, leading investors to wait for more clarity before making any decisions. any major investment decision.
While it’s not clear, Acheson noted that there isn’t much of a reason for existing crypto holders to sell their holdings. This suggests that this is a cautious time as investors wait for more information.