Bitcoin Resists Fall Below $20,000 Despite Fed Warning Interest Rates Will Go Higher

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Bitcoin has resisted a fall below $20,000 — despite the Federal Reserve warning that interest rates may need to go higher than previously thought.

Yesterday, Fed Chairman Jerome Powell confirmed that the U.S. central bank was increasing the base rate by 0.75 percentage points for the fourth time in a row.

Investor sentiment soured on Wall Street after he warned at a news conference that further action will be required to tackle stubborn inflation. Powell said:

"It's very premature, in my view, to think about or to be talking about pausing our rate hikes. We have a ways to go."

The latest hike means that the Fed's base rate now stands at 3.75% to 4% — a level that hasn't been seen in Bitcoin's 14-year existence.

As well as causing pain for consumers with mortgages and businesses with debt, high interest rates can make stocks and cryptocurrencies look unattractive — with lower-risk assets such as government bonds offering more generous returns.

One remark that particularly caused alarm bells was this: The Fed would rather go too far on interest rate hikes than do too little.

A Persistent Problem

While inflation was once regarded as a temporary phenomenon, central banks around the world are now having to contend with the fact that the cost-of-living crisis may be much harder to solve.

The latest U.S. Consumer Price Index stands at 8.2% — and while this is a slight improvement from the month before, it's well above the Fed's target of 2%.

Later on Thursday, the Bank of England is also expected to follow in the Fed's footsteps by increasing its base rate by 0.75 percentage points, too.

At the time of writing, Bitcoin was down just 0.7% on the day and trading at $20,335 — barely moved from before the Fed confirmed its interest rate decision.

By contrast, the S&P 500 in New York closed down 2.5%, while the tech-heavy Nasdaq shed 3.36%.