Crypto

Why is this week critical to bitcoin price?

This week, the US Federal Reserve will make a decision that should have a major impact on the global economy.

The US Federal Reserve – the equivalent of our national bank – the main guarantor of the economy, will meet this Wednesday to make a major decision for the economy.

In the United States, the Federal Reserve has three main objectives: price stability in the market, the guarantee of moderate interest rates, and full employment. It is she who largely regulates the banking system and makes decisions on economic adjustments. He is due to make an important interest rate decision this week. In this case, he will have to decide whether to raise interest rates and how much.

Specifically, borrowing money can cost even more money in the United States in a few weeks. Interest rates are viewed by the Fed as a tool that generally helps to control inflation – price spikes that have escalated due to the pandemic and the war in Ukraine. These interest rates traditionally cause consumption to plummet. By raising rates, the feds are cooling the economy. Consumption is falling, prices are also falling… Then the disinflationary process begins.

In this context, investors are traditionally quite cautious. It is no longer a matter of making a profit for them, but a matter of preserving their legacy. Thus, a significant increase in interest rates could have devastating effects on the stock market as well as on the prices of cryptocurrencies. In other words, some volatility is expected in the markets.

Such interest rate hikes are relatively rare. The last one happened in 2018. Analysts expect rates to rise by 0.5% in May. Other increases may follow in an attempt to regain control of inflation.

Since the beginning of the year, the NASDAQ has lost 20%, the Dow Jones – 9%, and the S&P 500 – 12%. Bitcoin has lost almost 44% of its value since last November.

The price of bitcoin could also be heavily impacted by the announcement of these new interest rates. Most analysts expect prices to fall to $30,000 or possibly $28,000. Thus, Bitcoin can pull all other cryptocurrencies with it.

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