Since March,when the federal Reserve started raising interest rates,the dollar index has steadily gained in value. This has brought pain and agony to the crypto world.
The main effect of raising the interest rate is that it makes borrowing cost high thereby slowing economic growth. For instance,if it cost more in interest to borrow dollars, businesses will think twice before doing it. This will thereby slow down economic movement and also reduce spending. This will in general tame inflation which was the main reason why the interest rate was increased in the first place.
On the long run, raising rates will weigh heavy on the economy and will lead to devaluation of the dollar which is a good thing for crypto currency. But for now it is going to be rough for crypto world.
The Terra implosion and 3Ac bankruptcy contagion sentiments are yet to wade off from the crypto world. People still think twice, infact thrice before investing in it. Some investors now see crypto as a Ponzi scheme which has lead them to go back to saving in dollars or in other assets.
In addition,the macroeconomics situations from inflation, deepening war in Ukraine, looming gas shortage in Europe, euro- pound crisis all contribute to rising confidence in dollar as people deem it prudent to start holding their money in dollars.
All these factors contribute to the weakening or drop in prices of Bitcoin and other altcoins.
Posted Using LeoFinance Beta