How the rise in interest rates has affected Bitcoin

Bitcoin fell more than 50 percent of its peak on Monday, widening this year’s loss, among other risky assets, amid fears about aggressive changes in the Federal Reserve’s monetary policy.

The world’s most traded cryptocurrency fell more than 6% to $ 29,590, falling below $ 33,000 for the first time since July 2021. The digital asset fell more than 53% from its all-time high of $ 69,044.77. Bitcoin’s market capitalization fell to $ 627.9 billion from about $ 1.22 trillion six months ago.

Ether, the most valuable altcoin, extended its losses on Monday, falling more than 6%, and the Tether stablecoin traded at $ 0.9998, just below its fix against the US dollar.
The Fed’s goal is to shrink its balance sheet while raising interest rates to reduce rising inflation.

The liquidity provided by the Fed’s incentives, as well as payments for government transfers, were channeled into cryptocurrencies and stocks in 2021. But as these sources ran out, cryptocurrencies and stocks began to fall.

Bitcoin fell about 30% this year, the Nasdaq fell 22 percent and the S&P 500 fell 13 percent.
Experts say this collapse should continue the rotation of protective dividend stocks such as preferred stock, utilities and consumer commodities.

Meanwhile, the dollar is becoming more attractive as a refuge, driven by the prospect of higher US interest rates. The dollar index, which tracks the dollar against the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona and the Swiss franc, reached a 20-year high.

Since March, the Fed has raised its base rate by 75 basis points to a range of 0.75% to 1%, and the central bank is expected to release more interest rate increases of 50 basis points this year.
A combination of the war in Ukraine, the blockade in China and fears of rising interest rates have made the crypto market less attractive to investors, who are now directing their investments to lower-risk assets such as the US dollar.

 Dealer Anatoliy Pavlov

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