The Fate Of Crypto In The Hands Of The Feds?
Bitcoin will definitely have its 14th "birthday" in 2022. This is virtually impossible to believe given the fact that it feels like just yesterday and we're still early (That's if you consider the developments and innovation that are still yet to come).
But despite being early, Bitcoin has performed wonderfully in the previous 14 years, skyrocketing in value and threatening to dethrone the US dollar as the world's reserve currency.
The month of January has always played a significant role in its history, with several significant events and milestones.But this January is actually turning out to be a very remarkable one looking at the charts and figures.
As 2021 ended,many would have been so sure that January 2022 would be a "Greenish" month given the outburst of so many innovations and developments like the Metaverse projects, gaming tokens,NFTs ,Web3, etc. But the reverse has been the case.
The Feds and interest rates!
On Jan. 26, 2022, the Federal Reserve said that it intends to raise interest rates when they meet in March . This he said was in order to combat inflation before it becomes a severe threat to the US economy. The U.S GDP expanded 6.9% in the fourth quarter of 2021 and this would influence the central bank's benchmark lending rate to be raised for the first time in more than three years.
Raising the borrowing costs that individuals and businesses pay for loans would definitely have the effect of slowing economic activity, which could help to keep inflation in check.
But then, there are fears that it may be too rapid to apply the brakes as this would definitely have a negative repercussion on U.S economy
Currently in the United States, short-term interest rates are almost zero. This was because at the start of the COVID-19 crisis in March 2020, the Fed swiftly slashed rates to zero in an attempt to cushion the shock of the steep recession that began that month when the US fell into lockdown. Over 40 million people (which is approximately quarter of America's workforce ) filed for unemployment in the first few months of the epidemic, a stunning number that had never been seen before in the job market.
Despite the fact that the recession was brief and the economy has largely recovered, the Fed has held interest rates around zero because many workers and businesses remain unemployed.
The Fed's main concern right now is the rise in consumer prices in the United States. Inflation has remained above the Fed's 2 percent target for the past ten months, with an annual rate of almost 7% in December. This is the highest rate of inflation in the last 40 years in the United States. Inflationary pressures indicate that people's prices for products and services are always rising, notably for staples like meat and gasoline, as well as manufactured goods like automobiles.
The Fed are simply afraid to allow this to continue since higher inflation would harm the economy if it became worse. And the longer it lasts, the tougher and more painful it will be for consumers and businesses.
They will simply establish a target range for the "federal funds rate." This rate serves as a standard against which all other interest rates in the economy are measured.
While the Fed didn't say when it would hike rates, Chair Jerome Powell stated that "the committee is of a mind to raise the federal funds rate at the March meeting, assuming that the conditions are favorable for doing so."
Analysts predict a 0.25 percent gain which would certainly raise the cost of borrowing for banks, and then trickle down to the rest of the economy as lenders charge higher interest rates on loans for homes, automobiles, businesses, college tuition, and everything else you would want to buy with debt.
This would be very catastrophic for the crypto market as this would dampen the money flow into crypto and Bitcoin
All these show how fundamental the market is.This is also consolidating on the fact that life is more fundamental than technical. It only takes one Fundamental analysis to nullify a million Technical analyses
But then, Does our fate lie in the Hands Of The Feds?
I definitely don't think so. At the end of it all,I still think that a great bullish market eagerly awaits us . This is simply based on the fact that more countries like Bulgaria, Turkey etc, are currently considering the legalization of bitcoin and crypto.
Bitcoin is fast moving into mainstream adoption despite the dipping market. A recent report has it that the global crypto accounts and users will surpass 1billion of the world's population by the middle of this year.
Right now, the positive news about bitcoin and crypto is more than the negative news and history has shown it that Bitcoin has always survived bad news.
As for me, I'll just sit and watch closely while all these unfold.