Crypto prices face another challenge as Central Banks target them

While the FED is said that crypto prices benefit from high inflation an increase in interest rates is not suitable for hard assets like BTC
While the FED is said that crypto prices benefit from high inflation an increase in interest rates is not suitable for hard assets like BTC

Experts see the price of Bitcoin (BTC) and all the altcoins falling in the coming months as central banks of many countries around the globe are realizing their mistakes and bringing solid regulations. For example, the China regulation led to a massive drop in crypto prices.

Many banks had reduced the interest rates in the COVID-19 pandemic. Now they are rising back. Norway’s central bank has recently increased its interest rate from zero to 0.25%. It said that there is a need to slowly normalize the policy rates again as the economy is experiencing “normalization”. 

Why increase the interest rates?

The Norges Bank, the central bank of Norway, justified the rise in rates by saying that the reopening of places has hiked the country’s economy. It has seen a significant increase in activities compared to pre-pandemic times. The bank further warned that the rate might increase even more in December.

Bitcoin advocate Nik Bhatia said that this rate increase might seem insignificant, but all the central banks keep track of each other’s actions.

Similarly, the Bank of England (BoE) tightened its monetary policies but kept its rates untouched. It warned on Thursday that international pressure over inflation has remained very strong. 

Increased inflation benefits crypto prices, but there’s a catch

On the other hand, the US Federal Reserve (Fed) notified that inflation was elevated by around 2% earlier this week. However, the Fed has kept its rates unchanged.

While the US FED is said that crypto prices benefit from high inflation, an increase in interest rates is never suitable for hard assets such as crypto prices and gold prices. It is because the increased rates make bank deposits more attractive to people.

Notably, the Fed’s expectations for an increase in inflation range from 2.4% to 3.4% and for interest rates, it might range from zero to 0.25%. This implies that interest rates after the adjustments for inflation would still be deep within the negative territory.