Inflation fell in the US and cryptocurrencies react with increases of up to 6%

Lately, the Federal Reserve raised rates at an unprecedented pace to curb inflation. Given the evidence that inflation is slowing, as well as the recent statements from the Fed last month, it is likely that it will continue to raise rates, but perhaps not as strongly. Previous rate hikes have been around 0.75%, while the next one is expected to be around 0.5%.

Higher rates have a ripple effect on small businesses, individuals, stocks, and even cryptocurrencies. As interest rates rise, the cost of bank borrowing increases, as debt becomes much more expensive. At the same time, cash in savings accounts can start earning an attractive return with much less risk than in the stock market.

Therefore, as rates rise, money slows down in the economy as cash doesn’t move as freely trying to chase higher yields.

Market concerns

News of the arrest of Sam Bankman-Fried, CEO of FTX and the suspension of USDC withdrawals, appear not to have drastically affected the price of cryptocurrencies.

What does seem to worry the market is the possible investigation for possible money laundering in Binance. According to Reuters, the Justice Department has been looking at Changpeng Zhao’s platform since 2018 and is divided on whether or not to bring criminal charges against the world’s leading exchange.

“The withdrawals on the platform underscore uncertainty and shattered confidence in the space, a desperation not to get caught up in another FTX event. Even when the situation seems very different. But that’s what fear does, especially in a situation where trust has been so badly damagedas in recent weeks, ”says Craig Erlam, senior market analyst at Oanda, in this regard.