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Global Central Banks Race into Inflation Battle: How Does it Affect Crypto?

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The inflation rate, which has been largely understated in recent years, is now gaining worldwide attention.

The political system just can’t hide it anymore.

Central banks have struggled to prevent inflation, mainly because they are the lap dogs of the entrenched financial system.

This resulted in a series of false and misled policies, a negative impact on bank reputation, and long-term damage to global markets.

We are just getting started…

Now The RBA Wants a Throw

  • The Reserve Bank of Australia (RBA) may be considering a rapid increase in interest rates following the FED’s announcement of an interest rate increase of 0.75% last Wednesday. It is the biggest interest rate hike since 2000 to (try) quash soaring US inflation.
  • The Fed called the shot, and central banks began to chase after it before things get out of control.
  • Earlier in June, the RBA shocked investors by raising interest rates twice as much as the analysts’ estimates – a 50-basis-point increase. As a result, the Bank stated that it would do everything possible to keep inflationary pressures under control.
  • Markets predict that future interest rates will be linked to a FED-sized rate hike, with the RBA raising rates by 75 basis points in the July or August meeting.
  • The RBA is not the only central bank that has acted. Australia is now part of a group of more than 50 central banks that will raise interest rates by more than 50 basis points this year.
  • Christine Lagarde, President of the European Central Bank (ECB) reaffirmed the ECB’s plan to accelerate interest rate hikes in July and September.
  • Like the RBA and ECB, many other central banks around the world are also struggling to fight against a higher-than-expected increase in inflation, caused by supply chain and energy disruptions due to the conflict between Russia and Ukraine, as well as embargo due to the pandemic in China.

The Economy Killer

According to financial analysts, the sharp increase in interest rates to cope with inflation will not benefit economic growth. We are going to a level that will result in fewer jobs, lower wages, and a general decline in the global economy.

The decision of central banks to raise interest rates following the FED meeting has an immediate impact on the cryptocurrency market.

Bitcoin and the other leading cryptocurrencies all experienced significant price drops. Due to market drops, crypto traders have been on an emotional roller coaster over the last week.

Ongoing bad news has repeatedly put the nerves to the test. The accumulated pressure caused a massive sell-off of highly speculative cryptocurrencies.

Global financial markets are betting that the US Federal Reserve will raise interest rates more aggressively than expected in the future. This fear has caused a sell-off in both the cryptocurrency and stock markets.

This is not the first time that individual investors have been tested, but it is the first time in many years that the market has experienced a significant drop as it becomes clear that central banks’ generous support policies are limited.

The shift in policy announced by FED Chairman Jerome Powell last week jolted the risk-on-asset market. Not only individual investors, but also professionals, have voted with their feet, selling risky assets at a record pace in months.

Previously, investors saw cryptocurrency as a solution to inflation, low-interest rates, or even recession.

Many expected that, despite the FED’s moves, cryptocurrency would continue to outperform other markets.

However, some investors have begun to question the functionality of cryptocurrencies. The recent reaction of the crypto market to the FED’s announcements has increased speculation.

Furthermore, as a result of the recent sharp drop in the value of the company’s stock and the cryptocurrency market, a number of the world’s leading cryptocurrency exchanges have laid off employees.

Several well-known companies are on the list, including Coinbase, BlockFi, Crypto.com, and Gemini.

We are on the precipice, and looking into the abyss. Some assets won’t survive this era in financial history. The author is betting that cryptos are one that will.

The post Global Central Banks Race into Inflation Battle: How Does it Affect Crypto? appeared first on Blockonomi.

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