Fed’s Stubborn Rates Threaten Crypto’s Rise - But Bulls See Opportunity
The Federal Reserve's unwavering interest rate policy creates headwinds for digital assets - yet crypto veterans spot silver linings in the storm clouds.
Interest Rate Standoff
Central bank stubbornness pushes traditional investors toward safer yields, temporarily draining liquidity from crypto markets. The Fed's 'higher for longer' mantra clashes with crypto's growth trajectory, creating the most significant macroeconomic tension since the 2022 bear market.
Digital Resilience
Bitcoin's institutional adoption continues marching forward regardless of rate decisions. Major corporations keep adding crypto to balance sheets while blockchain development accelerates behind the scenes. The technology evolves faster than Fed policy meetings - because unlike central bankers, coders don't take three-month breaks between decisions.
Market Mechanics
Lower leverage across exchanges creates healthier foundations for the next rally. With weak hands shaken out by high rates, the remaining holders demonstrate diamond-hand conviction. History shows crypto's biggest runs often begin when traditional finance least expects them.
The Fed fights yesterday's inflation battle while crypto builds tomorrow's financial system - sometimes it pays to ignore the old guard protecting their 0.25% yield playground.
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The M2 money supply is increasing, yet cryptocurrencies are lagging even as stocks and gold rise. For a genuine upward trend, stable declines in interest rates are necessary. This prospect, however, is hindered by the stringent stance of many Federal Reserve members. Currently, statements by Hammack, a Fed member, signal a bleak outlook for cryptocurrency enthusiasts.
ContentsStatements by Hammack at the FedFuture Inflation ConcernsStatements by Hammack at the Fed
Last week, a strategy announced an acquisition of 196 BTC, though it barely made an impact. The decline of interest rates remains the sole essential factor to accelerate the rise of cryptocurrencies, particularly altcoins. Throughout the week, various evaluations by Fed members, including Powell, were discussed, indicating a widespread reluctance to advocate for consistent interest rate reductions.
Only a maximum of three to four members are inclined towards continual rate cuts. This stance implies an increased likelihood of maintaining current rates at the October meeting.
During the preparation of this article, Hammack stated, “There is pressure in inflation, particularly in the service sector. The labor market appears generally balanced. We need to maintain a restrictive policy stance.”
Projections suggest that inflation will likely remain above target for the next 1-2 years. It’s unrealistic to assume customs duties will have a one-time impact. Inflation, especially in the service sector, remains pressured.
Future Inflation Concerns
Achieving the 2% inflation target by late 2027 or early 2028 seems unfeasible. Hammack expressed persistent worry about inflation, describing the current policy as “mildly” restrictive.
He emphasized, “Inflation is too high and trending in the wrong direction. Tariffs are a significant element of inflation.”
Hammack noted that this period poses challenges for the Fed on both of its mandates. Other labor market indicators show reasonable stability, but inflation expectations remain his primary concern.
Hammack concluded with a warning that inflation is a more pressing concern than the job market, necessitating a restrictive monetary policy to cool it down.
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