Federal Reserve Minutes and Crypto
Written by Contributing Writer, Crista Yamasaki
Neither this post, nor any other on cryptofal.com should be taken as financial advice. It is not.
On Wednesday, the Federal Reserve Bank released the minutes from the Federal Open Market Committee’s (FOMC) December 14-15 2021 meeting, announcing their plan to increase interest rates for 2022, only earlier and faster than previously anticipated.
In light of the continued recovery of the labor market and growing concerns over inflation, a more aggressive stance has been adopted to scale back the holdings of the Fed’s $8.67 trillion dollar balance sheet. The news of rate hikes and reduction of support come as no surprise to the financial and crypto community. Bond sales immediately increased on a domestic and international scale, while other central banks abroad are now posturing similar policy adoption as the Fed.
While stocks, bonds, and cryptocurrency markets continue to fluctuate, there are a few important takeaways from the now hawkish Fed. This movement indicates the Feds belief that the market is recovering at a strong enough rate to support and endure their proposed schedule. Moreover, despite volatility within the cryptocurrency space, the resulting dips in the market present an opportunity for buyers to enter at a lower position.
Inevitably, the digital currency market will fluctuate to reflect the changing level of confidence, however much of the digital currency space has existed without the support of mainstream investor confidence and will continue to do so. Government policy carries a level of weight to the recent movements, but other factors outside of the Fed meeting notes have contributed to the recent dips.
As we move forward into 2022 and inflation lingers as a central economic policy focus, it's important to recognize how cryptocurrencies play an important role to hedge against their fiat counterparts. Only so many predictive measures can be taken, but maintaining a diversified portfolio of investments that include cryptocurrency will prove advantageous for the future.