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Bitcoin Rips Higher On Federal Reserve Rate Hike

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The below can be an excerpt from the recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be one of the primary to get these insights along with other on-chain bitcoin market analysis right to your inbox, subscribe now.

On July 27, 2022, the Federal Reserve experienced with another 75-bp rate hike. This is broadly expected entering the meeting, with the marketplace assigning a 76.3% possibility of a 75-bp hike 1 hour before the meeting, with a (previously) 23.7% potential for a 100-bp (1.0%) rate hike occurring. Following the meeting and press conference, the most recent market data puts probably the most favorable odds on 100 bps of hiking left to accomplish by the finish of the entire year, across three more FOMC meetings.

Entering the meeting today, assets such as for example equities and bitcoin were upgrading in tandem, because the expectation of a dovish and neutral Fed in accordance with prior meetings increased investors appetite for risk.

The Federal Reserve hiked 75 basis points as expected and markets across the board rallied higher with no surprising or unanticipated bad news.

Equities and bitcoin moved up in tandem on the announcement

Lets go back to the FOMC meeting and the comments created by Powell. Here are a few of the very most notable comments through the entire span of the press conference:

  • The labor market is incredibly tight, inflation is much too high.
  • We think we are in need of an interval of growth below potential to generate some slack.
  • We don’t believe we need to have a recession.
  • Our thinking is that people need to get to moderately restrictive level by end of the year which means 3% to 3.5%.
  • Its likely that the entire aftereffect of rate increases is not felt yet.
  • The Fed wouldn’t normally hesitate on a more substantial move [rate hikes] if need.
  • We have been searching for compelling evidence inflation decreasing over next couple of months.
  • Pace of rate increases depends on data.
  • Its essential to have a rise slowdown.
  • We think we are in need of an interval of growth below potential to generate some slack [in the labor market].
  • I dont think the united states happens to be in a recession.
  • No-one can be certain on whether we are able to achieve a soft landing.

The comments from Powell which were particularly notable were the abandonment of Fed forward guidance by means of future rate hikes, that is a shift from prior Fed meetings. This step provides Fed the flexibleness to pivot if/when needed later on, that was obviously a confident sign for markets on the short-term.

Looking further forward from beyond todays meeting, the old adage of Dont Fight the Fed still is true, and regardless of the more bullish outcome being chosen today (a 75-bp hike rather than 100-bp hike), the effect for financial market conditions continues to be net tightening, that will likely take the time to be felt by markets.

Long-term investors and much more active risk managers alike would do far better assess the possibility of an all-time bottom being occur place for equities and crypto markets, or rather if that is another bear market rally.

In a previous article, LOOK OUT FOR Bear Market Rallies, we covered the dynamics of bear market rallies in both equity markets and in bitcoin to supply subscribers with historical context.

For readers searching for more on hawaii of the markets and the global economic outlook, our upcoming July Monthly Report will get into a lot more extensive detail on the interplay of geopolitics, monetary policy and financial markets. The report will undoubtedly be released to paying subscribers this following Monday.

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