Key Points
- FOMC holds rates at a 23-year high, delaying rate cuts.
- Persistent US inflation pressures crypto markets.
- Nearly $400 million in crypto liquidations over two days.
- Bitcoin falls from $70,000 to $66,000 amidst market turmoil.
In a surprising turn of events, the Federal Open Market Committee (FOMC) has maintained its stance on keeping interest rates steady, triggering significant market reactions. The FOMC’s reluctance to introduce promised rate cuts has led to substantial liquidations within the crypto market.
FOMC Keeps Rates Steady Again
On June 12, the Federal Reserve held its fourth policy meeting of the year, deciding to keep interest rates in the range of 5.25% to 5.5%. This decision marks a continuation of the policy rate held since July 2023, aimed at anchoring high inflation and bringing it closer to the 2% target range.
Federal Reserve Chair Jerome Powell reiterated that despite “considerable progress,” the central bank is not yet ready to implement rate cuts. This statement contrasts with the previous promise of three rate cuts for 2024, made in December 2023. The central bank has now scaled back this commitment to potentially just one cut for the year.
The #FOMC maintains rates at a 23-year high.
The central bank is less confident about introducing rate cuts.
The #crypto market responds to the FOMC’s hawkish stance.#CryptoNews👇https://t.co/40GYCQHMWG— Crypto-00711 (@00711Crypto) June 13, 2024
Crypto Market Reacts to FOMC Stance
The FOMC’s hesitation has had a pronounced impact on the crypto market. Over the past two days, the crypto sector witnessed nearly $400 million in liquidations. Bitcoin, which had soared to $70,000 on Tuesday, dropped to $66,000. Similarly, Ethereum fell from above $3,700 to $3,400, and other altcoins like Cardano, Solana, and Ripple saw declines of at least 8%.
Adding to the market’s turbulence, US spot Bitcoin ETFs experienced net outflows of $200 million, ending a record 19-day streak of net inflows. Despite a brief lift from the US CPI report, which showed inflation at 3.3% year-over-year in May versus the expected 3.4%, the market quickly reverted to its initial levels, indicating a persistent lack of investor confidence.
FOMC’s Rate Cut U-Turn Sparks $200M Crypto Liquidation Spreehttps://t.co/SmUjxWHc9O
— John Morgan (@johnmorganFL) June 13, 2024
Economic and Market Implications
The FOMC’s decision has underscored the ongoing challenges in managing inflation. Despite some economic improvements, the reluctance to cut rates reflects concerns over persistent inflation, commodity prices, and employment rates. This has led to heightened volatility in the crypto market, as investors react to the central bank’s cautious approach.
According to a survey backed by Grayscale, 41% of US voters are increasingly paying attention to Bitcoin due to the persistent inflation. Other economic blocs, like the EU and Canada, have opted to implement rate cuts this year despite grappling with inflation, contrasting with the US’s current strategy.
As the presidential election approaches, the FOMC’s policies and their impact on the economy will likely be closely scrutinized. The financial world, including the crypto market, carefully analyzes each FOMC meeting to gauge the US economic landscape and make informed investment decisions. Rate cuts, often seen as positive, allow for easier borrowing and investment in higher-risk assets like cryptocurrencies.
