When you choose to invest your money in various markets, there is always a risk of losses and gains, which is expected. There are times, however, that the losses you can suffer from have nothing to do with how you invest but with inflation.
The Fed interest rate hike means that the cryptocurrency market, including Bitcoin, would be greatly affected. Most experts believe that this rate hike will lead to a decline in the prices of various cryptocurrencies and may last for quite a while.
To learn more about how the Federal interest rate hike may affect your investment in Bitcoin, you will have to keep yourself informed in the coming months. Keep reading to discover what the Fed interest hike is and how you can protect your investments from the fallout.
What is the Fed Interest Rate Hike?
The word in the financial industry has been buzzing with the news that there may be further interest rate hikes on the horizon, which will be issued by the Federal Open Market Committee (FOMC). Experts say that this rate hike is likely due to the hot inflation and costs of labor that the United States has been experiencing.
Although the announcement so far is just half a percent increase, many believe that this will most likely only be the beginning of interest rate hikes at the federal level. In addition to this rate hike, there may be other plans in the works to ensure lower the effect of inflation on the economy.
This Fed interest rate hike may be just the tip of the iceberg when it comes to managing inflation. Experts have stated that it is likely that the financial world may see additional rate hikes that will affect various commodities, cryptocurrencies, and stocks.
In the long term, this hike in rates can have detrimental effects on these and other investments with people preparing for the increase. This means a decline in the amount of money that will be invested due to the anticipation of increased interest rates.
What Does This Mean for Bitcoin?
When comes to cryptocurrencies such as Bitcoin, as with other types of investments, have seen a decline in business since the meeting to decide on the interest rate hike is coming up. Since things are unsure at the moment, investors are unwilling to risk their funds before knowing what the outcome will be.
Interestingly enough, once word of the potential hike in the interest rate became public knowledge, investors everywhere put on the brakes on their investing as a whole for the moment. Once more announcements have been made, and everyone knows exactly where the interest rate hike will end, investors will decide their next move in both the regular and cryptocurrency markets.
In the meantime, many Bitcoin investors are having to wait, too afraid to put money they may end up needing into Bitcoin. The truth is until the meeting happens, no one knows exactly what may be the result. Not to mention that the cost of living has gone up astronomically around the world, with many countries reporting at least 7% inflation or more (the US is at 20% inflation) and people simply don’t have the money to invest in Bitcoin that they had before.
In addition to the interest rate hikes that will affect how much money people can invest in Bitcoin, many countries have called for a cut down on Bitcoin mining activities. This is because of the energy that is consumed during the process.
If the mining activities are asked to slow down, then Bitcoin could suffer an even bigger loss than it has in the past couple months. With the already high-interest rates and the slower production process, Bitcoin will not have the stellar months it has in the past.
Although Bitcoin and other cryptocurrencies are expected to take a hit with the upcoming potential for an interest rate hike, experts believe that it is still a great investment to have. They also believe that despite the hike, cryptocurrencies like Bitcoin will still come out on the positive side of revenues. Meaning it might be a good time to look at an investment.
Protecting Your Investments From Inflation
As you are thinking about how to stave off the effects of inflation and the midst of this Fed interest rate increase, it is important to understand that there are a few things you can do. While the interest rate hike represents a short-term solution, investments are a long-term activity.
This means that people have a choice when it comes to how they will respond to this current situation with the interest rate. You can choose to either jump ship and suffer a loss that may be recovered down the road, or you can stay the course and suffer a short-term loss that may turn into long-term gain later.
Experts suggest the following activities that you can do to protect your investments from inflation:
- Continue investing in stocks and bonds
- Maintain a diversified portfolio
- Buy cryptocurrency such as Bitcoin
- Purchase and hold index funds
Staying with the long-term goals may be risky, however, it is important to keep in mind that all investments are meant to be somewhat risky. While not every investment pays off in the way you want it to, does not mean that the next will not be successful.
By buying and holding (also called hodling) and continuing to make investment decisions to ensure your portfolio is diversified, you will end up ahead when things calm down. This is because things are typically more difficult at the beginning of what seems like a crisis than once you get through some initial humps.
Another thing to keep in mind about protecting yourself and your investments amid this Fed interest rate hike is that since many are jumping ship, you can most likely buy various investments at a cheaper price. This is because most people are not buying in times like this, which makes it a perfect time to add to your portfolio.
While no one knows at the current moment how things are going to go down with the meeting of the FOMC and other policymakers, for some this speculation is enough to send them packing, while others may choose to keep moving forward.
Whatever you decide to do, it is important to note that investing your hard-earned money is a risky venture. You must make your decisions with the help of an investment guru that has your best interests at heart so that you can come out ahead during this Fed interest rate hike.