Following the Fed’s announcement of the rate hike, the crypto market has seen a positive rally, quite the opposite of what many had expected. The Fed made a Announcement recently that it raised interest rates by 75 basis points to address rising inflation. The inflation rate of 9.1% is considered the highest in the past 40 years.
The Fed’s decision to raise interest rates is a result of rising inflation and a potential recession.
However, the global crypto market showed a positive result after the announcement. Following the announcement, Bitcoin, Ethereum and the entire crypto market gained in the single and double digits.
What could be the possible reason for the rally?
The current market rally can be viewed from different perspectives. The crypto market has reacted differently to the Fed’s rate hikes and other measures. After such decisions, Bitcoin and the crypto market have collapsed since March.
The expected rate hike by the Fed was 100 points, but the market expectation for the rate hike was 75 points. From one perspective, the crypto market generally followed a macro trend where the expectations of the market were met and the crypto market headed for a positive rally. If interest rates were raised by 100 points, the market would have plunged and traded in the red.
While this was not the common expectation, some traders even predicted the exact opposite. Griffin Ardern, a crypto trader from Blofin, stated that since the crypto market is still at a risk level and has not returned to a reasonable level, bitcoin could fall by 10% following the news from the Fed.
If the crypto market is completely turned around trader’s ideology, other traders believed that as the Fed hiked interest rates by 75 points, crypto could reflect a positive rally, with ethereum outperforming others due to the impending merger. This prediction is in line with the current market performance as bitcoin and ethereum gained 8.73% and 16.67% respectively after the news. Ethereum has outperformed bitcoin in double digits, as expected by many.
Traders who managed to gain an edge during the dip have made reasonable gains. But despite all the theories and speculation, there’s a chance that the rally could be a short-lived bulltrap. Since the crypto market also has the general tendency to change stance, there is room for correction, and the possibility of the market turning in the next 24-48 hours is also a possibility.