This afternoon, I talked about the data situation regarding the Federal Reserve's interest rate decision at 2 PM tonight, but many friends don't understand what the Federal Reserve's interest rate decision is really about? What impact does it have on the cryptocurrency market?
Let me elaborate in another post:
1. What is the Federal Reserve's interest rate decision mainly about?
The decision means a meeting, and the Federal Reserve's interest rate decision is mainly discussed by the Federal Reserve's 'core team' - the Federal Open Market Committee (FOMC) about two things:
Adjusting interest rates: Based on the economic situation in the U.S. (such as whether inflation is high or low, and whether employment is good or bad), they decide to raise, lower, or maintain interest rates, which directly affects the cost of borrowing money in the market.
Sending signals: After the meeting, they inform everyone how interest rates might be adjusted in the future, giving investors a 'preventive shot'.
2. The impact of the Federal Reserve on the cryptocurrency market?
When the Federal Reserve raises interest rates, traditional investments like saving money in banks or buying bonds yield higher returns with lower risk, like sitting steadily on one end of a seesaw. At this time, the cryptocurrency market is like the other end of the seesaw being lifted up; investors feel that the cryptocurrency market is risky and the returns might not even compare to traditional investments, so many withdraw their money from the cryptocurrency market and go to safer places, leading to decreased funds in the cryptocurrency market and declining prices. For example, many might sell Bitcoin to buy assets that provide stable interest.
However, if the Federal Reserve lowers interest rates, the situation reverses. Traditional investment yields become lower, making that end of the seesaw lighter, and the cryptocurrency market becomes more attractive. Investors, in pursuit of higher returns, will turn their attention to the cryptocurrency market. They believe cryptocurrencies might offer higher returns and can serve as a tool to counter traditional financial market volatility and inflation, like finding a safe 'haven' in times of economic instability, leading to significant inflows of funds and pushing cryptocurrency prices up.
This is a general idea about this interest rate decision, and the analysis has been included in this afternoon's article, which you can refer to!!!
