Crypto market increases after FED announcement

The Federal Reserve is reducing its bond purchases and announcing an increase in the key interest rate. The crypto market received the news surprisingly well.

The US Federal Reserve (Fed) has in one joint statement the central bank governors announced an accelerated shutdown of bond purchases and thus the gradual expiry of the rescue packages. With the measures introduced from January, the escalating inflation in the USA should be reduced to two percent in the long term. The inflation rate is currently 6.8 percent.

“Thanks to advances in vaccinations and strong political support, indicators of economic activity and employment have continued to improve,” the letter said. Starting next year, the Fed will double the reduction in bond purchases to 30 billion US dollars and will end this by mid-March, three months earlier than expected. An increase in the key interest rate is also expected for 2022.

Crypto market increases after FED announcement

The end of the rescue measures was positively received on the crypto market. The total market capitalization increased by 2.5 percent on a daily basis. While Bitcoin is unchanged, Ethereum (ETH) is catching up three percentage points and is now trading at just over 4,000 US dollars. Solana (SOL) even got a day plus of seven percent. The top performer of the ten largest cryptocurrencies is Avalanche. The AVAX rate is ten percent up on the daily comparison and thus again over 100 US dollars. The price increase is explained by the recent integration of the stablecoin USDC into the smart contract network. Dogecoin, who dropped to eleventh place, had to vacate the chair for AVAX.

Bank of England warns of crypto purchases

While the US currency watchdogs withdraw from the financial markets, the Bank of England warns crypto investors: inside of a total loss. A spokesman for the Bank of England told the BBC that there would be a “domino effect” if the value of crypto assets “fell sharply”. He also does not rule out a market collapse: “The price of cryptocurrencies can fluctuate very strongly and they could theoretically or practically fall to zero,” he explained.

There are currently no risks for the British financial system, unlike the central bank in the current one Financial stability report to write. But one is “vigilant about the risks that could arise from crypto assets”. The central bank is particularly concerned “if cryptocurrencies continue to grow so rapidly and become more intertwined with the broader financial system”. Around 0.1 percent of the private wealth of British households is currently invested in cryptocurrencies.

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