Over the past two years, rising interest rates have had a significant impact on commodities such as stocks, cryptocurrencies, and oil.
The expectation of rate hikes has been affecting the market for over two years and is expected to reach a critical point in mid-2023. The Federal Reserve has kept rates unchanged in 11 out of the past 12 meetings, including the meeting held on X date, X month, X year. The Fed had raised rates X times in the previous economic cycle.
Currently, few analysts doubt that rates will start to decline as long as the controlled inflation rate reaches 3.3% in March. The response of major asset classes to rising rates varies. The prices of cryptocurrencies, along with other high-risk assets, have declined, while many commodities, including oil, rebounded in early 2022, although these gains were short-lived. With the Fed’s fund rate hikes slowing and ultimately stopping in 2023, both oil and cryptocurrencies seem to have stabilized.
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Additionally, when the Fed announced plans to raise rates throughout 2021 and 2022, the value of cryptocurrencies declined along with other risk assets.
However, volatility in the banking industry has led many traders to turn to the banking sector, believing that future rate hikes will not be as aggressive. As the 10-year Treasury yield peaked in March 2023 and subsequently declined, the prices of risk assets rose.
