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Key Facts:

  • The Fed has raised its rate target this year to as high as 3.5%.
  • Analysts say that being too aggressive could make the recession last longer.
  • Cryptocurrency markets have lost more than 12% this month.

Interest rates may be an issue for crypto currencies. When the rate rises, trading volumes drop and the market goes down, which can hurt the value of the currencies.

Last month, the U.S. central bank raised interest rates. Investors may be moving into more risk-free assets because of that. March was the first time the Fed raised interest rates in more than three years. They went from 0.25 percent to 0.5 percent, which is still a small amount, but it was the first time in more than three years.

There needs to be a lot of quick action by the Federal Reserve Bank President, James Bullard. This year, the central bank needs to reach a 3.5% rate. Several half-point increases and even 75-point increases could be used to do this, reports said on April 18. Jerome Powell, the head of the Federal Reserve, said that at the bank's meeting in early May, the rate could go up by 50 points.

Fight Inflation

Central banks around the world are stepping up their fights against inflation, but many people will have to fight for a long time. People in the U.S. are buying gold and Bitcoin because inflation is at a four-decade high of 8.5%. (BTC).

However, with the rise in interest rates still going on, the demand for crypto assets seems to be going down. Those who use leverage to invest in crypto could also be affected by higher borrowing costs.

Gold and Bitcoin prices could go up if the Fed raises its interest rate target, an economist told CNBC on Monday.

Fed may be worried that not meeting their target "could push this economy not just into a short-term recession, but into a longer-term recession," he said.

In general, when fiat currencies are weak, people want to buy bitcoin and other crypto assets. However, that hasn't been the case recently.

It looks like the crypto market is going backwards

Since the start of this month, the value of the crypto market has dropped 12.3%. People have been leaving the space because of this.

The total value of the market is now just below $2 trillion, down 34% from its all-time high of about $3 trillion in November.

This week, the markets have gained 2%, but digital assets are still down. That trend could continue for the rest of this year.