Monetary policies implemented by the Federal Reserve (The Fed) have a significant impact on the crypto market. Here are some ways the Fed's policies affect the price of crypto assets:
1. Interest Rate Changes:
Interest Rate Hikes: When the Fed raises interest rates to control inflation, risky assets such as crypto often experience a decrease in demand. Investors tend to shift to safer assets with higher yields, such as government bonds.
Interest Rate Hikes: Conversely, interest rate cuts can increase interest in crypto assets. A low-interest rate environment encourages investors to seek higher yields in alternative markets, including crypto.
2. Liquidity Policy:
The Fed's asset purchase program increases liquidity in the financial markets. This abundant liquidity often flows into various assets, including crypto, driving up prices.
3. Fed Statements and Attitudes:
Statements from Fed officials can affect crypto market sentiment. For example, in December 2024, Fed Chairman Jerome Powell stated that the Fed has no plans to hold Bitcoin, which caused crypto prices to decline.
4. Global Monetary Policy:
The Fed’s policies not only affect the US economy but also have a global impact. Changes in US monetary policy can affect the exchange rates of other currencies, including the Rupiah, which in turn can affect the crypto market in Indonesia.
Overall, the Fed’s policies play a significant role in determining the direction of crypto asset price movements. Crypto investors need to monitor the Fed’s monetary policy and statements to make more informed investment decisions.