Crypto prices immediately came crashing down after Federal Reserve Chairman Jerome Powell announced they are increasing interest rates during an economic summit on September 21.
Now, in a not-so-delayed reaction, the United Nations is calling on the U.S. central bank and other large western regulators not to continue raising their interest rates, a UN agency says.
The Fed and other central banks worldwide raised their interest rates with the objective of containing the onslaught of inflation. The UN Conference on Trade and Development (UNCTAD) warns, however, that this could trigger a worldwide economic crisis.Better Days Ahead For Crypto?
UNCTAD published its Trade and Development Report 2022 on Monday, in which it expressed concern about the possibility of a global economic calamity brought on by the Fed’s rigid monetary policy, the effects of which would be felt most severely in developing nations.
“Any belief that they (central banks) will be able to bring down prices by relying on higher interest rates without generating a recession is… an imprudent gamble,” the agency said.
The market immediately reacted negatively to Powell’s reiteration that the Fed must maintain its fight against rising inflation by further increasing interest rates.
As has been the case over the past few months as the prices of Bitcoin and Ether have been increasingly tied to the stock market, the Bitcoin price and the larger crypto market followed suit.Current Fed Policy Hurts Vulnerable People Globally
“Current policies are harmful to vulnerable populations everywhere, especially in developing nations. Rebeca Grynspan, the UNCTAD secretary-general, made these remarks at a press conference in Geneva.
Market analysts at Bitfinex, a cryptocurrency exchange headquartered in the British Virgin Islands, have issued the following statements through email:
“The cryptocurrency market, like other risk assets, is extremely sensitive to comments made by the Federal Reserve, and it has been recently impacted by the Fed’s rate hikes.”
As of this writing, Bitcoin is trading at $19,603, up 3 percent in the last seven days, data from Coingecko show, Tuesday.
A Recession Would Benefit Crypto?
Meanwhile, predictions on how cryptocurrency prices would behave during a recession are all over the map. While the consensus is that the value of crypto assets will plummet in the event of a stock market crash, an opposing viewpoint is gaining ground.
A recession, which American investor Stan Druckenmiller believes will happen next year, would be good for the cryptocurrency sector as a whole, he says.
Druckenmiller pointed out that a growing lack of trust in governments and their central banks could be good news for cryptocurrencies. Because Bitcoin is decentralized, market watchers believe it will likely diverge from the pack and increase in price.
Some analysts believe that as Bitcoin rallies – whether the Fed hikes its rates or not – so will other major cryptos like Ethereum, Tether, and Dogecoin.
The Fed easing its current stance on interest rates could have a healing effect on the overall health of the crypto markets.
When the Federal Reserve meets again on November 4, they will decide if interest rates will be allowed to climb again. And with the UN now breathing heavily down its nape, the Fed must get back on the drawing boards and chart its next move.
BTC total market cap at $376 billion on the daily chart | Source: TradingView.com Featured image from BGR, chart from TradingView.com