On Wednesday, U.S. CPI numbers for May will be released and the Fed will meet to discuss their action plan for interest rates and fighting inflation for the rest of the year. Currently, the federal interest rate is at 5.50%, its highest in 22 years. If rates begin to trend downward, this could signal bullish sentiment for major cryptocurrencies and altcoins.
Why? Lower interest rates mean more cash in circulation, and money tends to flow towards riskier assets such as stocks and crypto. When the Fed cut rates in 2020 and the U.S. government launched a massive stimulus to fight the economic impact of COVID, it was the beginning of a bull run that led to Bitcoin peaking at over $60k.
Most analysts expect the Fed to keep rates the same this month; but people are divided as to when they think rates will actually go down – Wednesday will give markets a critical indicator as to when this will happen.
Some people are optimistic that it will happen earlier than later; after all, central bank authorities for both Canada and the E.U. have already moved to cut rates. But others are unconvinced that inflation has been controlled. As of Tuesday afternoon Asia market time, cryptocurrency markets are trending downwards, likely in anticipation of a not-so-positive move from the Fed.
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