- Markets may get rocked as the Fed pushes rates higher: Ricardo Reis.
- This may have repercussions on the crypto market.
- According to Reis, there is no downside to any of the risks.
According to Ricardo Reis, an economist at the London School of Economics, it seems probable that the Federal Reserve will increase interest rates by a greater amount than what the markets now forecast. This report has several repercussions for the cryptocurrency industry according to experts.
To begin, the increased interest rates will allegedly lead to a reduction in the amount of funds that are readily accessible for investments in cryptocurrency initiatives. If businesses are unable to get the resources they need to finish their projects, this might result in project delays as well as financial losses for investors.
Second, it may cause a general decrease in the value of cryptocurrencies as investors exit the market and shift their money into conventional assets that provide greater yields. Third, it may result in increased transaction fees, which would make it more costly for consumers to buy, sell, and otherwise interact with cryptocurrencies.
Last but not least, the increasing cost of borrowing might also contribute to a rise in the cost of mining, reducing the profitability of the industry for those who work in it. At the very least in the near future, the cryptocurrency market may be subject to the unfavorable effects of all of these issues.
According to Ricardo Reis, there is no downside to any of the risks. “The bare minimum is a rate of 5.5%,” he said further.
The Federal Reserve increased the maximum possible value of its benchmark interest rate to 4.5% one month ago. A terminal interest rate of 5.25% was assumed by the central bank.
Investors who participate in the fed-funds futures market currently, therefore, anticipate that the Federal Reserve will halt rate hikes once they reach 5%.
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