The cryptocurrency market traded gloomy on Tuesday (July 26) ahead of the US Federal Reserve (FED) interest rate announcement today (July 27).
The Fed is widely expected to raise the US federal funds rate by 75 basis points today – from 1.75% to 2.5% – bringing rates back to effectively neutral to combat rising inflation. . Meanwhile, some commentators refused to rule out a 100 basis point increase, Pimco North American Economist Tiffany Wilding told Bloomberg her firm believes it could be more than that. .
Cryptocurrencies are trading lower in stocks as traders weigh the potential impact of a rate hike. This comes after a rally last week that saw the cryptocurrency’s global market cap recapture $1 trillion – it has now surrendered these gains.
James Malcolm, head of FX strategy at UBS also questioned the appeal of digital assets today compared to conventional investments. FTX.US President Brett Harrison posed a similar question on Twitter: “How will the rate hike scheduled for July 27 affect DeFi yields? Will DeFi lending become a less attractive interest rate vehicle in a higher interest rate environment?”
Bitcoin was trading at $20,897 on July 26, down 5.8% from the previous day’s price, according to CoinGecko data.
Meanwhile, Ethereum is down 9.9% during the same period, trading at $1,372, as the global crypto market cap hovers around $995.