THE IMPACT OF FEDERAL OPEN MARKET COMMITTEE MEETING TOWARD CRYPTO PRICES DURING 2021 TO 2023
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Abstract
The objective of this study was to examine the impact of the Federal Open Market Committee (FOMC) meeting's interest rate policy on cryptocurrency prices. The sample utilized comprised all 24 FOMC meetings held between 2021 and 2023, each lasting approximately two hours. The study revealed that US monetary policy deliberated during FOMC meetings exerted influence on cryptocurrency prices throughout the aforementioned period, with a specific focus on the immediate effects of interest rate policy discussions on Bitcoin, Ethereum, and other cryptocurrencies. The research methodology involved gathering cryptocurrency price data for Bitcoin and Ethereum during FOMC meetings, identifying key variables indicative of crypto price volatility, and employing an econometric model. Utilizing data collected over a 5 - minute interval, the study utilized the GARCH (1,1) model to analyze fluctuations in the cryptocurrency market during FOMC meetings. The findings of this investigation unveiled a downward trajectory in volatility over time for both Bitcoin and Ethereum, particularly evident at the onset of FOMC meetings. Heightened market volatility during this period correlated with increases in interest rates, resulting in diminished demand for cryptocurrencies and elevated borrowing costs. Consequently, trading activity, liquidity, and investor confidence experienced declines, ultimately precipitating reductions in the prices of digital currencies.
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References
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