The Crypto markets have been dealt a significant blow by the Fed’s interest rate tightening that started in early 2022. The Fed’s decision to continue raising the interest rate till inflation is brought down to its target of 2% has resulted in investors withdrawing from risky assets to buy bonds and other safe haven currencies. As a result, the crypto market has witnessed a massive crash with various digital assets including Bitcoin losing more than 70% of their values, since the rate tightening commenced. Will the Fed continue raising the rates during the second half of 2023? Can crypto survive the Fed’s whip should they continue raising the interest rates during their next session? This article has discussed these important concerns among crypto investors today.
Can Crypto Survive the FED’s Whip?
The Federal Reserve has been raising interest rates to combat inflation. This has led to a sell-off in risky assets, and affected the number of investors willing to buy stocks and cryptocurrencies today. Some experts believe that the Fed’s tightening cycle could spell the end for crypto. Others believe that crypto will be able to weather the storm and emerge stronger on the other side.
There are several reasons why the Fed’s tightening cycle could be bad for crypto.
First, higher interest rates make it very expensive for companies and individuals to borrow money. This could lead to a decrease in investments in crypto, as investors may be less willing to take on more risk.
Second, higher interest rates could lead to a decline in economic activity. This could lead to a further decrease in demand from investors to buy Crypto online, as people may have less money to invest.
Third, the Fed’s tightening cycle has dampened investors’ confidence, creating fear of the possibility of a prolonged bear market in crypto, especially should the Fed continue raising the rates during the second half of the year.
Additionally, the crypto industry is still relatively young and untested and had experienced high cases of exchange failures and failed crypto projects during this period. This creates the possibility of some old investors who have lost massively during this period not coming back into the market again.
Notwithstanding, there are also several reasons why crypto could survive the Fed’s tightening cycle.
First, crypto is a decentralized asset, which means that it is not so much subject to the same monetary policy as traditional assets. This could make it more attractive to investors who are looking for an alternative to traditional assets especially now that the prices have been greatly discounted.
Second, crypto has a limited supply, which could make it more resistant to inflation. Third, crypto is becoming increasingly adopted by institutional investors. This could provide a floor for the price of crypto, even if there is a sell-off in the broader market.
Third, the crypto industry is still evolving and constantly innovating. This could lead to the development of new products and services that make crypto more attractive to investors.
Above all, the crypto community and investors have been passionate about this amazing technology. This could help drive more massive adoption and demand for crypto, even in a down market.
While it is very difficult to decide whether crypto will be able to survive the Fed’s tightening cycle. However, there are several reasons to believe that it could. Crypto is a decentralized asset with a limited supply and is becoming increasingly adopted by institutional investors. These factors could help crypto to weather the storm and emerge stronger on the other side. In all, investors need to apply proper risk management practices during such moments of crypto market uncertainty.