FED Rate Hike Is Expected This Week, Here's What Might Happen with Crypto

The Federal Reserve System of the United States is expected to increase the key rate in the country, which may greatly affect both equity and digital assets markets, but while some traders remain cautious, others believe that the market has already priced expectations. Santiment provided the community with S&P and crypto correlation data to determine a potential effect on the market.

According to the data provided, interest in inflation and the FED rate hike are currently the two main narratives in the space as the market expects increased volatility when the regulator announces its decision.

FED hikes the key rate

The most highly expected decision from the regulator is an actual hike of the key rate. The FED previously announced that citizens should expect a hike in March. Both crypto and equity markets reacted to the announcement and corrected down.

🏦 This week will be big for #crypto and #equities traders, as the #Fed is expected to decide on a quarter-point rate hike this week. #Bitcoin & #Ethereum have been pegged to the #SP500 in 2022, and these decisions should impact #cryptocurrencies greatly. https://t.co/G2G5Nsn8kr pic.twitter.com/XhvpJ9fj0z

— Santiment (@santimentfeed) March 14, 2022

The market's plunge was caused by a sentiment shift: risk-on tendencies are changing to risk-off as investors choose more stable options like bank deposits and yields over stocks and digital assets like Bitcoin and Ethereum.

The increased rate hike often correlates with the outflow of funds from high-risk stocks in biotech, IT and similar sectors that faced massive growth in 2020-2021.

FED leaves same rate

A more surprising decision from the regulator would most likely cause uncertainty on the market since it has already priced the opposite. But risk assets may in fact rally on the decision to leave the same rate, for whatever reason.

Such an income is close to impossible as the U.S. economy is already suffering a massive inflation surge and a record-breaking increase in prices.