The prices of Bitcoin, Ethereum, and other popular cryptocurrencies fell on Monday due to expectations that the Federal Reserve would raise its key interest rate by 0.75%, the largest increase in three decades.
At the time of writing, Bitcoin had fallen to a weekly low of around $21,012; a 2.8% decrease over the past 24 hours. Ethereum has also dropped to its current value of $1,528, a decrease of about 5%.
Cardano, one of the top ten most valuable cryptocurrencies, took the biggest blow, dropping by over 7% overall, closely followed by Dogecoin (-4.4%), Solana (-4.35%), and XRP (4.15%).
Data from CoinMarketCap shows that, as of press time, the total market capitalization of all cryptocurrencies fell from $1.08 trillion last Wednesday to $570.4 billion.
The most recent price movement occurred before the Federal Reserve’s two-day meeting, which begins on Tuesday and is anticipated to end with the U.S. central bank increasing interest rates by an additional 75 basis points.
The Fed has already raised the benchmark short-term borrowing rate by 1.5% this year, including a 75 basis point increase in June that was the largest in nearly three decades.
The Fed will increase the interest rate that banks charge each other for overnight loans to a target range of 2.25% to 2.50% to combat rising inflation. The assistance provided to the American economy during the pandemic would subsequently come to an end.
Every sector of the economy is impacted when the federal funds rate increases. The cost of credit cards, savings accounts, home equity lines of credit, student loan debt, adjustable-rate mortgages, and other loans will increase. Less readily available borrowing is anticipated to lower inflation by reducing consumer demand.
But it’s interesting to note that since the Fed began raising rates in March, inflation in the United States has increased, hitting a new four-decade increase of 9.1% due to rising food, gas, and rent prices.
Increases in interest rates may also impact stocks and cryptocurrencies, increasing the likelihood that capital inflows will decline and, ultimately, slowing economic growth.
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