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Here’s how financial assets act during historical financial event
Following the historic and long-awaited rate hike by the Fed, most assets on the cryptocurrency and traditional financial markets rallied, as Santiment reported, after investors and traders correctly priced the hike.
According to the on-chain data provider’s data, the market expected a 50 bp rise and have previously priced the potential tightening of the country’s monetary policy. Prior to the hike, most assets, including cryptocurrencies, commodities and stocks, lost part of their value.
Following the first 50 bp rate hike, financial experts are now aiming at a more modest hike in June, which will be at approximately 25 bp while expecting 75 bp previously. The next 50 bp hike is expected on July 27.
📈 The #Fed made their move as expected today, with a 50 basis point interest rate rise. Unsurprisingly, the impact shifted #bullish almost immediately for #crypto, just as it did after the March hike. We may have another #selltherumorbuythenews scenario. https://t.co/F0jEa9pNl3 pic.twitter.com/ofsiYVLYL0
— Santiment (@santimentfeed) May 5, 2022
The tapering will begin on June 1 with $47.5 billion, and with $90 billion expected initially. Despite the Fed making the right moves to control inflation, some market experts do not think it is enough to tame the rapidly rising inflation.
What’s there for crypto?
The series of rate hikes we see now is the first ever test for the cryptocurrency market. Unfortunately, digital assets are mostly following the tech and IT stocks considered high-risk assets, which usually underperform during the risk-off market.
Some cryptocurrency market participants believe that digital assets will break from the consolidation with tech stocks and become more commodity-like assets that will not underperform during a series of rate hikes.
Since the beginning of monetary policy tightening, Bitcoin has lost around 6% from its value, which is insignificant for such a volatile asset like the first cryptocurrency. Commodities like gold are also not faring well during hawkish periods coming from the Fed and have lost around 7% since March.
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