Interest rate hikes in the United States and elsewhere could weaken investors’ appetite for riskier investments, according to the latest World Economic Outlook report from the International Monetary Fund (IMF).
This warning comes at a time when historic low rates have helped push institutions (and retail investors) toward bitcoin (BTC) and other crypto assets, indicating that a tightening of US tax policy may have a negative pullback for the crypto market, which is considered to be riskier than traditional assets.
However, the IMF report suggests that global market risk appetite may not be dampened in all scenarios in which the US Federal Reserve raises rates. If the rises are accompanied by positive news about the recovery of advanced economies, for example, the IMF hypothesizes that risk aversion among international investors will remain low.
The IMF report specifically dealt with emerging markets (i.e. developing nations / economies), which could suggest that its findings have direct implications for bitcoin and the cryptocurrency market in general, as they deal in particular with tolerance. to risk.
Summarizing in the conclusion of the fourth chapter of the report, the IMF researchers wrote:
«An unexpected sign of higher US policy rates in the future that is not driven by changes in economic conditions in the US unambiguously leads to a tightening of financial conditions in emerging markets.»
In other words, the significant increases in interest rates in the US, combined with the lack of good economic news, will have the effect of dissuading investors from placing their capital in emerging markets. And, by extension, they are less likely to invest in a (relatively) risky asset like bitcoin.