On October 3rd, Wolf_of_streets, via Twitter, stated that rumors are beginning to swirl around that the U.S. Federal Reserve (FED) might stop raising rates or even slash them in the coming months. The handler mentioned that this is due to the recent crisis in Europe, the liquidation of the Swiss Credit, and the unprecedented decline in other national currencies. It is a necessary intervention, the user said, to make the USD less pricier, a relief to the broader financial market.
Rumors are starting to circulate in the market that the US Federal Reserve may at least stop raising rates or even lower them. The reason lies in the crisis in Europe, the bankruptcy of the Swiss Credit, the unprecedented fall in national currencies, and so on. 1/3 #btc #crypto
— The Wolf Of Few Streets (@wolf_of_streets) October 3, 2022
Moreover, the UN has urged banks to refrain from raising interest rates. In a press statement, they added that increasing lending rates would result in a sharp rise in non-performing loans and a chain reaction of bankruptcies.
The Federal Reserve has raised interest rates multiple times this year to combat inflation. With this, financial institutions, including mortgage firms and more, have been grossly affected by rate hikes, making loans expensive. As a result, citizens have been tightening their belts, spending less in light with the prevailing economic conditions.
Cryptocurrencies have not been spared either. As it is, interest rate hikes have been forcing prices lower as investors scuttle for safety, pulling liquidity away from top crypto assets like BTC, ETH, and ADA, stashing them in instruments like U.S. treasuries and bonds which are perceived to be safer and less volatile, backed by the U.S. Therefore, with falling crypto prices, traders have been taking a wait and see approach, leading to thin liquidity, heaping more pressure on crypto assets and thereby causing huge valuation drops.
A pause or general reduction in rate hikes would be a lifesaver for many markets, and primarily, top assets like Bitcoin which are described as store of value assets The U.N. appeal has helped Bitcoin recover, reading from how prices have been performing this week.
Presently, Bitcoin is relatively firm but mostly stagnating around the $20k psychological level, reading from coin trackers. However, should the FED–and most central banks–begin shifting their monetary policies to a more dovish stance, it is highly likely that Bitcoin (and cryptocurrencies), will tear higher.
Subsequently, Bitcoin’s dominance, which is currently at multi-month lows, may recover as capital begin flowing back to the world’s most valuable and liquid cryptocurrency.