Fed Funds Target Range v BTC

Fed Funds Target Range vs BTC

The Federal Open Market Committee (FOMC) sets the circle Federal Funds Target Range (FFTR), which is the interest rate at which commercial banks lend and borrow their excess reserves to each other overnight.

• The FOMC meets eight times a year to set the FFTR.
• The FOMC sets a target range.
• The effective interest rate is then a number between the lower and upper bounds of the target range.

Rising interest rates can impact confidence in markets, this can potentially spill over to Bitcoin. Rising interest rates can cause some investors to move towards perceived low-risk assets such as fixed-rate bonds.

The Federal Funds Rate is a tool used to try and combat high inflation by raising interest rates. Standard economic theory suggests that higher interest rates mean higher borrowing costs, which can result in people being incentivised to borrow less and therefore spend less money. This decrease in demand for goods and services should theoretically cause inflation to fall. Whether that happens in practice is determined by many other factors in the global economy.

The Federal Funds Rate can also influence short-term rates on consumer loans and credit cards and can have significant impacts on sentiment in markets. As Bitcoin grows and becomes more inter-connected with global markets, the Federal Funds Rate becomes a metric that Bitcoin investors increasingly monitor.