Here’s how financial assets act during historical financial event
Following the historic and long-awaited Fed rate hike, most assets in the cryptocurrency and traditional financial markets rallied, as Santiment reported, after investors and traders traders correctly priced the rise.
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.
And after?
After the first rate hike of 50 bps, financial experts are now targeting a more modest hike in June, which will be around 25 bps compared to 75 bps previously. The next 50 basis point hike is expected on July 27.
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 in it for crypto?
The series of rate hikes we are seeing now is the very first test for the cryptocurrency market. Unfortunately, digital assets mostly track tech and IT stocks that are considered high-risk assets, which typically underperform in the risky 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 start of the monetary policy tightening, Bitcoin has lost around 6% of its value, which is insignificant for such a volatile asset as the first cryptocurrency. Commodities like gold also don’t fare well during hawkish times coming from the Fed and have lost around 7% since March.
