Bitcoin and Every Top-20 Crypto Is Trading Red in Advance of Pending Fed Rate Hike

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  • A busy week for economic data coming up as 170 companies report second-quarter earnings; the Fed will likely increase interest rates to cool inflation; and we should know if the U.S. is trending toward a recession when productivity data are released Thursday.
  • Investors appear to be exiting risky investments such as crypto, as the entire cryptocurrency market is down 4.5% and every top-20 crypto is down over the past 24-hour stretch according to CoinMarketCap.

On Wednesday of this week, it's widely expected that the Federal Reserve will announce plans to raise short-term interest rates another 0.75%.

At press time, the valuation of the broader crypto market is down more than 4.5%, while every top-20 crypto is also trading in the red for the past 24 hours across cryptocurrency exchanges, according to CoinMarketCap. The biggest and most popular cryptocurrency, Bitcoin, is following suit as it is also trading lower in the 4%-5% range, while the U.S. equities market was up a fraction on the day according to Yahoo! Finance.

Current Fed action may not be enough

Last month, the year-over-year inflation rate hit another 40-year high -- marking 13 straight months of inflation higher than 5%. Those numbers forced the Fed in June to announce a 0.75% increase in short-term interest rates to try and cool the red-hot inflation. At that same June meeting, Fed chair Jerome Powell alluded to the possibility of another 0.75% increase at the central bank's July meeting, which runs this Tuesday and Wednesday.

Assuming the Fed increases interest rates another 0.75%, that would push the price to borrow money 2.25%-2.50%, but it's not clear if that's enough to slow rising inflation when you consider the June number surged to 9.1%. In fact, former central bank chair Ben Bernanke recently criticized the current Fed leadership, stating that they should have responded last year when inflation started spiking in April 2021. We'll see what happens on Wednesday, but the Fed's current plan of attack appears to be too little too late. Unfortunately, the average consumer is paying for that monetary policy mishap -- literally -- as they pay higher prices at the gas pumps, grocery stores, and virtually everywhere else.

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