On May 1, the United States Federal Reserve (FED) will announce its decision on interest rate policy. This decision is being closely watched by both domestic and foreign investors worldwide, due to the significant impact it could have on the economy and the prices of stocks and cryptocurrencies.
In the days that follow, attention to the crypto market will intensify. In addition to the interest rate decision on May 1, the unemployment figures in America will be released on May 3. These figures provide insight into the strength of the US economy and are a crucial factor for future interest rate policy.
The influence of American interest rates on the crypto market
Why do interest rates in America play such a crucial role for the crypto market? Due to rising inflation in recent years, the Federal Reserve (Fed) has significantly raised interest rates in the United States.
The aim of this is to cool the economy by making borrowing more expensive, which in turn should help reduce inflation. In general, low interest rates are good for investors: it is easier and cheaper to borrow money, allowing investors to inject more capital into the market. Moreover, companies can afford more debt without a high risk of bankruptcy.
With low interest rates, it becomes less attractive to put money in a savings account because of the low return. In such a financial environment, investors are turning en masse to alternative investment options to increase their returns, including cryptocurrencies. Historically, Bitcoin (BTC) has performed well during periods of low or declining interest rates.
Interest rate reduction is unlikely
The market estimates the chance that the Federal Reserve (Fed) will leave interest rates unchanged at more than 95%. This implies that a cut in interest rates is unlikely, which could potentially put further pressure on the prices of Bitcoin and other altcoins.
Market analysts emphasize that a drop in interest rates is likely necessary for Bitcoin to reach a new all-time high. Currently, Bitcoin is in a downward trend; in the last 24 hours the price has fallen 2.4% to a current level of $62,270.
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Source: https://newsbit.nl/rentebesluit-federal-reserve-zorgt-voor-spanning-op-de-crypto-markt/
