The highly anticipated FOMC (Federal Open Market Committee) meeting did not result in changes to the interest rates. The US Federal Reserve announced plans to accelerate the reduction of its monthly bond purchases. Starting next year, they will buy $60 billion in bonds per month, $30 billion less than they were buying in December and 50% of what they were buying before the November taper, CoinGape wrote.
Fed Chairman Jerome Powell said:
Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation.
The effect of ‘buy the news’
The Fed was expected to announce new measures at the meeting given that the US inflation rate has never been this high in almost 40 years. Insiders called the meeting a “Buy The News” event. It was seen as critical for the Bitcoin and crypto market as a whole. After the Fed’s latest set of announcements, the crypto market responded in green as anticipated.
The market slump has not phased Bitcoin whales in the slightest. They continue to accumulate the asset across the board. Two days ago, Bitfine’s limit order book showed retail investors were selling in a panic ahead of the meeting as institutional investors continued to buy Bitcoin in large amounts.
The original expression is “Buy the rumor, sell the news,” which means people buy based on positive rumors, then sell when the real news emerges. “Buy the news” means that traders already know what’s going to happen and prices have been set respectively.
Fear causes mass selling off
At present, fear is causing mass selling off on the market. It can react positively after uncertainty is removed, even if the meeting ends up being bad news. According to insiders, it’s never about the actual news. Bitcoin was trading at $4,800 at the time of writing, and Ethereum – at just over $4,000.
Another bull run with rising inflation?
Governments worldwide are fighting rising inflation. At uncertain times like these, the mainstream market grapples with fear, taking a back seat. Then, cryptocurrencies rise to new highs as an inflation hedge. This happened at the beginning of 2021 and when the second wave of the pandemic paralyzed financial markets. We saw cryptos rise to new highs.
According to market insiders, Bitcoin will become a major inflation hedge particularly after its institutional adoption increased considerably throughout 2021.
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