Faced with inflation that does not slow down in the United States, the U.S. Federal Reserve (Fed) has struck hard towards a new sharp increase in its key rate to try to curb inflation, while ensuring to avoid recession.
The Fed’s monetary committee (FOMC) raised its key rate by three quarters of a percentage point, as expected by the markets. The rate is now between 2.25% and 2.50%.
Inflation is way too high,” said Fed boss Jerome Powell, acknowledging that the latest inflation barometer at 9.1% in June, a new record in more than 40 years, “was even worse than expected said central bankers.
This should lead to a further increase in its key rates. Following its intervention, the crypto market has experienced a slight correction.
Bitcoin fell by nearly 1% and Ethereum by 2.70%
The crypto market fell following the various announcements of the FED. The latter stated that it would continue to raise interest rates to stop the rampant inflation in the US. The FED believes that inflation is still far too high despite a still strong labor market and an unemployment rate that remains low, about 3.5% as of February 2020, a 50-year low. It adds that there is no indication that inflation will abate in the coming weeks or months.
Bitcoin fell by nearly 1% following this announcement and by 1.5% in 24 hours, it is currently trading at around $ 23,450. Ethereum has corrected by nearly 2.70% in 24 hours and is trading around $ 1850. Slight corrections after these new announcements that the market seemed prepared to hear.
The stock market has experienced a slight correction with the Dow Jones falling by 0.1%, the S&P 500 by 0.2 and the Nasdaq more strongly by 0.6%.
Remember that the FED sets its long-term objective at 2% for inflation, far from the more than 8.5% for a year for the month of July, which the United States is currently experiencing. This rate is also the highest in nearly 4 decades, reflecting the exceptional nature of this price surge.
As a reminder, the central bank has raised its policy rate by a total of 225 basis points since early 2022. Market observers believe it could raise rates by another 75 basis points at its September meeting.
Investors have already shied away from cryptos as well as tech giants’ stocks. Add to that serial disasters in the crypto industry and you get the bear market we are currently experiencing. These particularly risky assets are the first victims of the complicated macroeconomic conditions we have been experiencing since the beginning of the year.
An underlying trend that remains favorable to cryptos
While the short to medium term environment remains complicated, the underlying trend remains favorable to the crypto industry. Indeed, a study analyzed by Blockdata reveals the massive investments of large companies in the field of blockchain.
Among these companies that believe in the future of the technology is the giant Alphabet, the parent company of Google. The web giant has indeed invested more than $1.5 billion from September 2021 to mid-June 2022. Among these investments are well-known companies in the sector such as Dapper Labs, the company behind NBA Top Shot, or Fireblocks, the digital asset custody platform.
Second on the list is the world’s largest investment fund BlackRock with $1.17 billion. The global economic giant has invested in the FTX exchange and the USDC Circle issuer. To complete the podium we find the bank Morgan Stanley with 1.11 billion dollars.
Just behind is another global giant with the South Korean Samsung which invested in 13 companies including Ramper, Alep or Animoca Brands for 977 million dollars. The rest of this ranking allows us to observe a significant number of banks: Citi, Wells Fargo or Goldman Sachs. Players who until recently declared not to believe in the crypto industry, sometimes even calling it a scam. We also note the presence of payment players like Paypal or American Express.
This new analysis highlights the increasingly massive investment of the giants of the traditional economy and Web 2.0 in blockchain technology. In recent months, this trend has thus gained momentum and allows to remain optimistic about the future of the crypto market. This news added to the resilience, for now, of the market are all encouraging signs for the future.