How the Economy Is Affecting Cryptocurrency

Bo Polny
3 min readNov 3, 2022


Despite the lackluster performance of both bitcoin and Ethereum this year, experts are still surprised that the two cryptocurrencies are still strong. While various factors affected the cryptocurrency market last week, it still managed to maintain its relatively stable performance. The Federal Reserve’s decision to raise interest rates caused the stock market to tank.

Although the political situation in the U.S. and other factors, such as the upcoming midterm elections, is expected to impact the cryptocurrency market significantly, some believe that the current economic conditions are not affecting long-term investors.

Despite the various factors that have affected the cryptocurrency market this year, experts are still optimistic about the market’s potential. The fourth quarter will be an exciting time for investors as it will determine if the prices of both bitcoin and Ethereum will eventually sink or swim.

Federal Rate Hikes

Since the beginning of the year, the Fed has raised interest rates five times . The central bank has been trying to slow the economy down to contain the rising prices by implementing a restrictive monetary policy. The current stance of monetary policy will harm the employment situation.

Since the beginning of the year, the prices of various cryptocurrencies have reacted negatively to the multiple rate hikes by the Fed. In September, the central bank increased its interest rate by another 75 basis points.

Although the market reacted negatively to the latest rate hike by the Fed, it wasn’t as pronounced as it had been in a previous couple of months. According to experts, the market had already priced in the expected increase in interest rates.

Although the market’s reaction to the latest rate hike was less pronounced, it’s not yet clear if the market’s reaction to major macroeconomic events is a sign that the trend is starting to reverse.

High Inflation Rates

Despite the positive statements about the potential of the digital asset market, it’s still unclear if it’s a hedge against inflation.

A healthy risk appetite is significant for the cryptocurrency market to remain stable. Since the Fed has been trying to slow the economy down by implementing a restrictive monetary policy, it has turned investor sentiment against cryptocurrencies.

During the week following the release of the August inflation data, the prices of various cryptocurrencies took a hit. For instance, bitcoin dropped 4% and 7% during the 24 hours.

Experts believe that the adverse effects of the rising prices will continue to affect the cryptocurrency market in the coming months. With that in mind, they expect the prices of various cryptocurrencies to continue falling.

Some experts also believe that the dollar’s strength negatively affects the cryptocurrency market. However, some believe a weakening dollar could benefit cryptocurrencies such as bitcoin and Ethereum. The dollar’s strength is the main reason investors are withdrawing money from the cryptocurrency market.

Midterm Elections

The November elections are the last major event affecting the cryptocurrency market this year. Although it’s not expected to have the same level of interest as the presidential elections, several seats are still up for grabs.

Although it’s hard to predict the results of the elections, it’s generally believed that markets will bounce back once the uncertainty surrounding the event dissipates.

One of the main factors contributing to the market volatility is the actions of incumbent congressmen and senators. They pass regulations and bills in the last hours of the year to boost the economy. After the elections, the lawmakers rush to implement their pledges to the public.

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Bo Polny

Based out of Newport Beach, CA, Bo Polny is a cycles timing analyst specializing in the cryptocurrency and precious metals markets. Learn more @