Cryptocurrencies edge higher as markets react to Fed news

High market volatility on Wednesday triggered volatility in cryptocurrency prices, as markets struggled to process the outcome of the Fed policy meeting. In a surprise move, the US Federal Reserve voted to raise its benchmark interest rate by 75 points on Wednesday, taking aggressive action against inflation. Even though the US Federal Reserve performed an unexpectedly high rate hike, market reaction was uncertain following the Fed meeting.

Stocks rallied later on Wednesday though, boosting cryptocurrency prices. Crypto markets have been known to follow the overall trends of stock markets and especially of tech stocks. The dollar index fell below 104.8 on Wednesday, after the announcement of the Fed interest rate. The dollar had been overbought in the past few days in anticipation of a hawkish Fed meeting and the Fed’s announcement fell within market expectations driving the dollar down.

Market sentiment has been fragile during the past couple of weeks, causing volatility in stock markets and cryptocurrencies alike. A strong risk-off sentiment has prevailed since the beginning of the year due to geopolitical tensions, driving investors to safer assets and dampening the appeal of cryptocurrencies. As however, the crisis drags on, and risk sentiment is slowly returning to markets. 

Bitcoin price climbed above $22,000 on Wednesday. If Bitcoin price declines, support may be found near $19,200, while resistance may be found near $32,300 and at $40,000. 

Ethereum price also edged higher on Wednesday rising above $1,200, but still trading below the $1,500 psychological level. If the Ethereum price declines, support may be found at the psychological level of $1,000, while resistance may be encountered at $2,000 and higher up at $2.170.

The shift of major central banks towards a more hawkish fiscal policy has been putting pressure on cryptocurrencies over the past few months. Most major Central Banks are turning towards a tighter policy and a return to pre-pandemic interest rates, driving cryptocurrency prices down. The Fed rate hike had already been priced in, however, providing a boost to crypto markets.

BTC/USD 1h Chart

ETH/USD 1h Chart

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Written by:
Myrsini Giannouli

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