By
Chimamanda U. Martha
April 25th, 2024
According to Federal Reserve chairman Jerome Powell, the rate hikes were necessary to ease inflation.
Stocks linked to crypto rallied on Wednesday as the Nasdaq index rebounded due to the 75 basis points hike in interest rate. Before the jump, these equities have been at their lows due to their ties with crypto. However, the stocks associated with crypto rose as the tech-heavy Nasdaq index gathered some gains after the Federal Reserve’s announcement on hiking the interest rate.
Stocks Exposed to Crypto Rally as Fed Increases Interest Rate
While crypto companies’ stocks grew on the additional interest rate, the top two cryptocurrencies by market cap, Bitcoin and Ethereum, also spiked after a not-so-good week. BTC added 1%, and ETH rose over 1%. The additions also reached crypto miners. The beneficiaries include Marathon Digital (NASDAQ: MARA), Riot Blockchain (NASDAQ: RIOT), and HUT 8 (NASDAQ: HUT). Additionally, Bitcoin-backed firm MicroStrategy (NASDAQ: MSTR) and crypto exchange Coinbase (NASDAQ COIN) each gained at least 3%. Galaxy Digital also advanced about 5%.
The US central bank announced it was raising the key rate, raising the target range to 3% to 3.25%. The decision results from the 2-day meeting of the Federal Reserve Open Market Committee. The increase will be the third time the Fed will pronounce such an interest rate. Analysts are more expectant of the “Terminal Rate,” which is the level the interest rates will pick before the Feds stop announcing additional increases. For now, the projection is that the rate will be at 3.8% in 2023. However, the Fed may have to make changes to this figure considering the situation.
According to Federal Reserve chairman Jerome Powell, the rate additions were necessary to ease inflation. “We have to get inflation behind us,” he stated, adding that he wishes there was a “painless way to do that.”
Terminal Rate Predictions
In expectation of the adjustment, economists are already predicting what the terminal rate could look like. Goldman Sachs (NYSE: GS) analysts expect a 4% to 4.25% range by year-end, and Citigroup (NYSE: C) analysts believe the rate may advance as much as 5%.
Kevin Nicholson of Riverfront Investment Group voiced his opinion about the economic situation.
“Until there is a major slowdown in inflation the Fed will continue to hike. Financial markets are finally getting the message that the Fed will not blink, so we believe that there are more hikes to come. No one knows what the actual terminal rate will be, so in the meantime it is like a long road trip where the kids keep asking… are we there yet?”
Meanwhile, Independent Advisor alliance chief investment officer Chris Zaccarelli said the Fed would continue to raise rates. He noted that “they will cause a recession in the process.”