Categories: Bitcoin Latest News

Bitcoin Breakout Elusive as Traders Price In 7 Fed Rate Hikes for 2022

The Fed is likely to raise rates by 25 basis points on Wednesday, the first hike since 2018.Read MoreFeedzy

Bitcoin dropped and U.S. stock futures nursed losses as interest rate derivative traders expect that the U.S. Federal Reserve (Fed) could raise rates seven times this year and the tightening cycle would peak at a level higher than previously anticipated.

The top cryptocurrency traded 3% lower on the day at $38,300 during the European session, having almost tested the $40,000 mark late Monday, CoinDesk data shows.

The futures tied to the tech-heavy Nasdaq 100 index traded 0.5% lower, signaling a continued risk aversion. On Monday, the index fell 2%, leading the S&P 500 and Dow Jones lower as investors rotated money into value stocks from growth stocks ahead of an impending Fed rate hike on Wednesday.

As of Monday, overnight index swaps saw the Fed funds rate or the benchmark interest rate at 1.85% after the December meeting. An overnight index swap is an agreement where a fixed rate is swapped against a pre-determined published index of a daily overnight reference rate.

In other words, with the current effective Fed funds rate at 0.08%, traders expected 175 basis points worth of tightening for 2022. That’s equivalent to seven quarter percentage point (25 basis point) rate hikes. Markets had priced in two of the seven rate hikes, leaving five on the table following Russia’s invasion of Ukraine on Feb. 24.

The renewed hawkish repricing aligns with investment banking giant Goldman Sachs’ forecast. It suggests bleak near-term prospects for risk assets, including bitcoin, more so, as traders see interest rate peaking around 2.57% in the second half of 2023 – up 50 basis points in one week and 100 basis points this year, according to Reuters.

Marc Chandler, chief market strategist at Bannockburn Global Forex, said the Fed is likely to raise the forecast for the so-called terminal or peak interest rate to 3% from December’s projection of 2.5%.

The Fed is widely expected to kick off the tightening cycle on Wednesday with a 25 basis point rate hike.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Recent Posts

Crypto Expert Arthur Hayes Says Bitcoin Has Found Its Local Bottom – But Can It Hold This Level?

Arthur Hayes, the co-founder and former CEO of BitMEX, recently shared his thoughts on the…

3 hours ago

Bitcoin Back Above $63,000: Will FOMO Fuel Another Rally Or Lead To A Bust?

The Bitcoin price made a strong comeback on Friday after witnessing a significant amount of…

13 hours ago

Grayscale’s Bitcoin ETF Sees First Inflow After Billions Lost Since January

GBTC, the biggest spot bitcoin ETF, has seen its assets under management lead over BlackRock's…

18 hours ago

BTC-e Operator Alexander Vinnik Pleads Guilty to Money Laundering Conspiracy Charge

Alexander Vinnick, the Russian national who was one of BTC-e's operators, pled guilty to conspiracy…

21 hours ago

Bitcoin Price Surges Towards $61,000, Eyeing Potential Breakout To $67-$68k Range

Bitcoin (BTC), the largest cryptocurrency in the market, has experienced a notable resurgence in its…

21 hours ago

Crypto Expert Turns Bullish On Bitcoin, Predicts Quantitative Easing Will Begin Soon

Crypto expert Michaël van de Poppe has made a bullish case for Bitcoin as he…

22 hours ago