The FED, Inflation and Global Adoption

Crypto assets saw some wild swings during the day and are now trading upwards. Risky assets are reacting to the FED’s decision to hike rates by 25 basis points, and increasing global adoption could amplify the boost.

Related literature | Expectations of Aggressive FED Drop, Here’s Why Bitcoin Could Rise to $50K

Which walks? Crypto Responds to the FED

The Federal Reserve just raised interest rates by 25 basis points, raising interest rates for the first time since 2018. Six more increases are expected in 2022.

Markets have experienced volatility amid expectations for a more aggressive FED given the implications of the Russo-Ukrainian war, rising US inflation and rising Covid-19 cases. During the day, the crypto market first had a downward reaction, which experts described as a fake out, and then started reacting on the upside.

Total Crypto Market Cap at $1.7 Billion in Daily Chart | Source: TradingView.com

Experts expressed during a Fox Business Live that the FED is lagging and that this move will not affect the economy. They added that the FED is giving investors a clear field to do well in equities, “not to worry about the US economy.”

Likewise, the slight rate hikes look positive for bitcoin and, consequently, other crypto assets.

Chairman Jerome Powell claimed that “the chances of a recession within the next year are not particularly high”, adding: “All the signs are that this is a strong economy, one that will be able to thrive – not to say resist , but certainly flourish – in the face of a less accommodative monetary policy.”

As Coin-Crypto has reported, the 25 bps rise scenario looks bullish for Bitcoin due to its more passive stance.

As many believe the FED’s dovish move comes as a belated reaction and will do little to nothing about US inflation, investors can take refuge in Bitcoin, as it has done before. Inflation is expected to remain high at 4.3% by the end of 2022, above the Fed’s annual target of 2.3%.

Holding savings in the bank only means a loss of purchasing power, and as a result, many people may come to see Bitcoin as a hedge against these losses. Cameron Winklevoss, the co-founder of Gemini, argues that the best way to protect yourself from rising inflation is Bitcoin.

“Imagine paying a money manager 7.9% a year to do absolutely nothing with your money. That’s what inflation is. It is a hidden management fee that is not reimbursed. Today, if you hold cash in USD, you are paying the US government 7.9% to do nothing with your money. Scary.”

Ukraine sings crypto regulation

Amid the Russo-Ukrainian war, crypto also seemed like the only viable option for the people affected by the invasion and sanctions.

Ukraine has benefited from crypto assets in several ways during the war. They have received more than $108 million in donations in crypto assets, and citizens have reportedly been able to use digital coins as a tool to carry their money safely with them when fleeing the country.

In addition, clarity on crypto regulations in the US and other places is expected. Many politicians are taking stances in favor of cryptocurrencies, and Ukrainian President Zelensky is not lagging behind.

Volodymyr Zelensky just signed a law “on virtual assets” to legalize crypto. One official statement says this law “creates conditions for the launch of a legal virtual asset market in Ukraine.”

“The signing of this law by the president is another important step to bring the cryptocurrencies sector out of the shadows and launch a legal virtual asset market in Ukraine.”

The Deputy Minister of Digital Transformation, Alex Bornyakov, expressed that they believe “that the crypto industry offers new economic opportunities. We will do our best to bring the bright new future closer as soon as possible.”

This does not mean that cryptocurrencies are legal tender in Ukraine, but crypto holders are now legally protected in the country. This favorable sentiment seems to be growing among many politicians and governments around the world, which could lead to a burgeoning institutional adoption of crypto.

As both Russians and Ukrainians need an alternative to the traditional financial institutions, they have also resorted to bitcoin and stablecoins.

In addition to the functional side that Ukrainians experience, in crypto Russians can find refuge from their devalued ruble. This is a global example and could end in a positive scenario for the market.

Related literature | Ukraine’s leading news outlets aim to bring in $1M by selling NFTs

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