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Bitcoin price climbs higher ahead of today's Fed meeting

 


The markets can breathe a sigh of relief just before the FOMC meeting. However, the reason for this is not what Jerome Powell has to announce this evening German time, but the developments in Ukraine. The cautious optimism in the negotiations and the recent statements by the Ukrainian President Selenskyj caused a significant plus on the stock markets.


This was also felt in the cryptocurrency market, with BTC gaining almost 5% and trading at $40,470 at the time of writing. Once again there is a correlation between what is happening on the stock markets and Bitcoin. On the one hand, this is particularly positive because it shows that this relatively young market is slowly growing up. On the other hand, it seems to be sealed that Bitcoin is no longer a bet against the financial system.


The "digital gold" is not particularly stable in the crisis and this raises the question of how Bitcoin will react to the Fed's interest rate hike.


Rate hike remains bearish for bitcoin

So far, most analysts are expecting an increase of 25 basis points. If this assessment turns out to be true, the crypto market is unlikely to overreact as this outcome is likely already priced in.


However, should there be a surprise today, two scenarios are very likely. If the increase exceeds the expected level, it should have a negative impact on Bitcoin. However, if the Fed should backtrack and not hike or even cut into negative territory, that would be an extremely positive signal.


However, the latter scenario is more wishful thinking, as the Fed has essentially no other tools at hand to curb inflation.


Altcoins remain highly risky

The 2021 bull market has left many investors with the impression that no price target is impossible. But the rules of the game have recently changed. The corona pandemic and the resulting economic difficulties are slowly catching up with the whole world. In this respect, the war in Ukraine is the sad culmination of a chain of circumstances that make a global recession increasingly likely.


In this current situation, Bitcoin can be clearly identified as a risky asset. This applies even more to altcoins, because unlike the mother of all cryptocurrencies, they are only based on marketing promises, which are even more difficult to keep in such a bad overall situation. Of the more than 5000 different coins and tokens listed on platforms such as Coinmarketcap, the majority can confidently be described as vaporware.


Accordingly, given the overall situation on the markets, there is a mismatch between risks and opportunities when considering an investment in altcoins.

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