Chairman of The Fed, Jerome Powell, released his rate hike. He hinted at the fact that there may be better times ahead for not only the crypto industry but the greater financial industry as a whole.
This is just the type of news we wanted to hear, from falling inflation to a surge in Bitcoin and altcoin prices this week. All thanks to the man in charge at the United States Federal Bank. Let’s hope Jerome Powell continues on this trajectory, and we can expect to see a thawing of the crypto winter we’ve found ourselves in since last year.
Just the past seven days saw the total cryptocurrency market capitalization increase by around $35 billion, and the industry continues to recover from the multitude of bankruptcies in 2022.
FED Rate Increase Helps Crypto Recover
Some argue that the pace of the recovery is slowing down. This might be the cause of another bearish reversal. Others are making a bullish case because they expect the US Federal Reserve to pivot in its monetary policy and to slow down inflation.
This is supported by this week’s FOMC meeting when the Fed hiked the rates with 25 basis points – exactly as many expected. This had a positive impact on the markets as a whole.
Bitcoin soared to a high above $24,000 for the first time since August 2022, while the rest of the market also rallied. There’s been a correction since, and at the time of this writing, BTC trades at around $23,500, charting an increase of 2.7% for the week.
It’s Not Just Bitcoin That’s Recovering Either
That said, the increase in BTC’s dominance has been slowing down for the past couple of weeks. That means that altcoins are starting to catch up. Some of the coins with larger capitalization, such as Fantom (FTM), are up 30% on the weekly. ATOM is up 15%, while Avalanche is up 17.4%.
The field of decentralized finance is also on the rise, with Ethereum layer-two scaling solution Optimism leading the charge. Its native cryptocurrency OP is up a whopping 45% in the past seven days alone. This brought its total gains to more than 230% for the month.
All in all, the predominant market sentiment has also improved tremendously in January. Presently, it stands at “greed” after being trapped in the “fear” and “extreme fear” zone for multiple months. It’s interesting to see whether the positive trend will continue in the following days.
Let’s talk about the nitty-gritty of what Jerome Powell said at the committee meeting. This is what we know about what came from the Chairman of The Fed:
The U.S. Federal Reserve officially announced that it was bringing interest rates to the 4.50% to 4.75% range, a 0.25% increase from last month. Rates were still at 0% less than a year ago.
The rate increase was widely anticipated by markets. Analysts priced the odds of a 25 basis points hike at 98% and the odds of a 50 basis points hike at 2%. Neither major indices nor the crypto market reacted strongly to the announcement, with BTC only rising 0.07% immediately after the news.
FED Continues Fight Against Inflation
This marks the eighth time the Fed has raised interest rates since the beginning of 2022. The central bank outlined its plan to tighten monetary conditions in November 2021. This was to fight raging inflation; back then, interest rates were at 0%.
After being criticized for not taking inflation fears seriously, the Fed quickly moved to raise rates on a monthly basis—first by 25 points, then 50 points, then 75 points on multiple occasions. By doing so, the bank raised the cost of borrowing, which in turn strengthened the value of the dollar.
And a stronger dollar ultimately means a robust crypto economy back home.
