Rate hikes create fear in markets

News / Tim Stolte

Powell, the president of the United States Federal Reserve (FED), held a press conference last Wednesday. In his speech, he announced that the central bank would implement a interest rate increase of 0.5% to curb the ever increasing inflation. This increase is relatively unique, but was in line with the expectations of market participants. The rate hike thus didn’t immediately lead to lower stock prices.

More notable were the central bank’s plans for the coming months. The FED would want to increase the interest rate by 0.5% multiple times in a short timespan. Many investors anticipated even bigger rate hikes, leading to higher stock- and crypto prices. The market quickly reversed course, however. Not 24 hours later Wednesday’s gains were erased and almost every market posted significant losses. 

It is clear that the macro-economic circumstances can lead to a lot of insecurity on financial markets. Increasing interest rates and higher inflation numbers can have significant influence on the price movements in the crypto sector. It’s still unclear if crypto’s fundamentals can change these movements, but it’s clear that the bad news is currently being felt around the globe and in all markets.

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