How the Fed Rate Hike Could Impact the Crypto Market Amidst Banking Crisis Fears

The crypto market is awaiting a new decision on a rate hike by the US Federal Reserve. This time it is extra exciting because of the banking crisis that can cause an “economic catastrophe”.

Bitcoin and Ethereum prices are anxiously awaiting the outcome, but it seems likely that the Fed will raise rates by another 25 basis points after Wednesday’s monetary policy meeting.

Estimates about the possible rate hike

Market sentiment in the coming weeks is highly dependent on the direction Fed Chairman Jerome Powell indicates. Today, futures for the Dow Jones, S&P 500 and Nasdaq indices are in the green. However, GDP growth and earnings in the first quarter are lower than expected. The collapse of the First Republic Bank has also fueled fears of a banking crisis, but JPMorgan predicts that this crisis is nearing its end.

As a result of the current problems, former Federal Reserve Bank of Dallas president Robert Kaplan suggests that the Federal Reserve should consider a pause. He believes the banking crisis has only just begun as shares of US regional banks fell significantly on Tuesday.

Tai Hui, the leading market strategist at JPMorgan, also says the economy is slowly cooling, as data on open vacancies released Tuesday shows. Hui believes the Fed should raise rates by another 25 basis points and then pause. He is referring to the Reserve Bank of Australia’s rate hike yesterday, following a pause last month. In addition, he predicts that interest rate cuts will take place this year and that the Fed will try to bring inflation to its target rate by 2024.

Bitcoin traders are anxiously awaiting

Over the past 24 hours, Bitcoin’s price has remained fairly stable and is currently trading around $28,450. However, trading volume has increased by 5% over the same period, indicating growing interest among traders.

The US dollar index (DXY) reached a low of 101.51 today. The DXY shows volatility and is likely to rise following the Fed rate hike. This increase will also put some pressure on the price of Bitcoin. Nevertheless, Powell’s optimistic sentiment will prevail and point to a pause in the coming months.