The hawkish stand of the Fed Reserve is hanging like a sword on the crypto sector and the global crypto market looks to sink below the $900 billion mark. The number one crypto asset, BTC is struggling at $19K while Ethereum is also in the throes of a post Merge slide. The biggest question which is when will the crypto sector get out of the rut it has landed in. Experts are optimistic that crypto currency will bounce back sooner than expected.
When Will Crypto Sector Bounce Back?
The current crypto winter is blamed on the increasingly hawkish stand by the Fed Reserve and there are talks that a huge 100 bps interest hike is expected and this does not bode well with the crypto sector future.
However, experts contend that a 100-bps hike is not expected in September. Founder of Northman Trader Sven Henrich believes that the market is already having death throes from the 4.5% interest hike. However, it cannot be confirmed that Fed may never reach those levels.
The current Fed chair Jerome Powell is enamored by his predecessor Paul Volcker who is indicted for causing the great crash of the 2000’s when the world went into a recession. However, there are some key differences -Volcker’s interest hike came at a time when the US debt was 30% of the GDP. Currently, it stands at 125% of the GDP.
Volcker advocated cutting rates when the core inflation was still around 10% as a measure against recession. At present all the technical indicators point that the US economy has already entered the path of recession and a third successive negative growth will likely tip the economy to a recession. This fact has also been highlighted by the World Bank which has issued an ominous warning that the world could go in a recession in 2023.