Over the last 24 hours, Bitcoin has surged 4.7% following the US central bank’s announcement that it will not change interest rates. According to data from CoinGecko, the largest coin by market capitalization is changing hands for $43,145, as of this writing. Its close rival, Ethereum, has also witnessed a price growth. It trades at $2,297 after posting 24-hour gains of 5.4%.
In a statement, the Federal Open Market Committee (FOMC) said it aimed to bring inflation down to 2% and achieve a higher employment rate. To ensure these objectives are realized, the Committee resorted to maintaining the interest rates within the 5.25% – 5.5% range.
Speaking to the press on Wednesday evening, Fed Chairman Jerome Powell said the United States economic recovery has progressed beyond the general expectation. Still, Powell explained that the economic activity remained below the level it was before the Covid-19 pandemic and that the path ahead was uncertain.
Crypto Market Participants Ruled Out Rate Hike, CME FedWatch Tool Shows
According to the CME FedWatch tool, most investors and traders expected the Federal Reserve to maintain the interest rates. The tool indicated that 98% of crypto market participants were optimistic that the US central bank would leave the rates unchanged.
Cryptocurrencies, led by Bitcoin, tend to rally when the Federal Reserve lowers or leaves the rate unchanged. That’s because the prices of digital currencies correlate with central bank policy and risk equities. So, when the credit conditions are favorable, the chances of cryptocurrencies rallying are high because low interest rates drive investors to withdraw their funds from banks and inject them into assets considered risky, such as crypto.
For example, Bitcoin surged significantly from early 2020 to mid-2021 after the United States central bank lowered the interest rate to 0.25%. But when the Fed announced rate hikes last year, Bitcoin led other cryptocurrencies in trending downwards as investors withdrew their funds from the crypto market and deposited them into banks to earn high interest.
More Cryptocurrencies Rally
Bitcoin and Ethereum are not the only digital currencies that have rallied in the past 24 hours. XRP is up 3.5% to trade at $0.628; Solana has surged 8.5% to $72.37; Cardano is changing hands for $0.644 after rising by 10.6%; Chainlink is up 5.2% to $15.06; and Polkadot is valued at $7.34 following a 7.1% surge.
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