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Interest Rates Modify The Prices Of Cryptocurrencies

Cryptocurrencies

The economy has recently been the main target of destabilization worldwide, so the task of the Federal Reserve and the central banks of the powers affected have been quite hard. This information and much more on the Bitcoin-Prime trading system. Learn more

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The last crisis of 2008 is perhaps the benchmark in economic and financial measures where interest rates were handled so low that they could be considered zero to inject the most significant liquidity into the various economies.

Today we are facing a completely different situation as a result of which the measures have been characterized by a significant increase in these rates, leading the economy to generate aggressive inflation that directly affects citizens and their purchasing power.

The scenario is perhaps more complicated by the war between Russia and Ukraine, a situation that, to date, has not shown signs of change.

Maintaining an economy is not an easy task, which is why the extremes where rates are usually either extremely low or extremely high does not contribute to stabilization; on the contrary, the market at all levels contracts and is affected, as occurs with the stock market and indices, but this time I reach digital currencies.

After the events caused by the pandemic, it has been seen how many products, goods, and services have increased unexpectedly. Still, it is interesting to evaluate the crisis that was generated in the distribution and production chain, in addition to the increase in the price of hydrocarbons, and the power hasn’t helped either.

Inflation has reached its highest value in perhaps forty years of history, which is why digital currencies, as new elements incorporated into the finances of individuals and large companies, are notably affected.

A negative start to the year for cryptocurrencies

Bitcoin had been registering prices that had reached relevant historical highs, which began to be affected at the end of 2021, to receive the economy in January with a set of economic and financial measures that did not work against the fight against inflation; on the contrary, economic growth was affected.

Perhaps the price decrease was not so marked at the beginning of the year. Cryptocurrency investors were still confident that external economic agents would not affect crypto assets. Still, everything turned out to be much more complex.

In the case of Bitcoin, it has lost more than 50% of its last price recorded as a historical maximum, a fact that created panic among its followers. That is when the situation gets complicated.

Free supply and demand are the elements that modify the behavior of the cryptographic market, showing that in the face of excess supply, prices tend to decrease, and in the opposite case, a high demand, prices increase disproportionately.

The balance between supply and demand was entirely out of adjustment and broke all the schemes; the only way to evaluate what could happen is the historical reference of the evolution of the prices of cryptocurrencies and their performance during the various stages.

The more points above, the more significant the impact

The interest rate increase in the Federal Reserve of the United States has been developed in an ascending manner; at first, it was considered that it could be a transitory measure, but it has been shown that it obtained a permanent character and more than expected.

There have been several announcements, and to date, several increases have radically impacted the financial markets. Among them are cryptocurrencies, which seem immune to these measures.

The downward trend that has been registered has caused greater chaos concerning technology companies and those listed on the NASDAQ stock market, thus influencing cryptocurrencies as digital financial instruments.

Perhaps the most difficult months have been April and May since the trend has been maintained. So it is not surprising that investors are anxious about a change in direction. Still, the road to breaking that price of $24,000 Bitcoin seems endless.

Although Bitcoin and cryptocurrencies are not regulated markets, it has become a digital financial market where technology is anchored to the operations that are executed through these assets; it is there was a constant decline has contributed to many users deciding to sell their crypto assets and take refuge in some other financial instrument that can generate more excellent stability.

Conclusion

It was an utterly atypical year in financial operations with cryptocurrencies, where, undoubtedly, the interest rate increases have significantly affected their performance.