How to Manage Your Crypto Investment In the Midst of Inflation and Fed Interest Rate Hike

Published on
May 18, 2022

You might have already observed that the prices of an overwhelming majority of goods and services have gone up since the beginning of this year due to historic inflation. To overcome the inflationary pressures, the Federal Reserve decided to tighten the monetary policy by raising the interest rate by 0.5 percent in May - the biggest increase since 2000.

While this move may help with managing inflation, it is also going to have an effect on investment drivers, particularly ones that are more prone to price volatility.

Why Did Federal Reserve Increase the Interest Rate?

Before we can realise the implications of the interest hike by the Fed, it is important to understand the underlying reasons. With inflation touching the 8.5% mark, the Fed has a duty to ensure the economy doesn't spiral out of control.

Increasing the policy or interest rate raises the cost of borrowing money. This results in reduced spending that drives the demand down to decrease the inflation rate without causing an economic recession. That being said, it is a tight rope to walk on as the Fed needs to find the right balance between controlling inflation and bringing the economy to a complete halt.

Apart from inflation management, increasing the interest rate also allows the Federal Reserve to sell bonds that reduce its outstanding loans. This cuts down the amount of money in the economy and decreases consumption.#

What Does the Interest Rate Hike Mean for Crypto

In simple terms, an increase in interest rate is not good news for the crypto market and we will continue to see the recent volatility at least in the short term. Basically what happens is that when Fed increases the policy rate, investors tend to become more conservative with their spending. It has become quite clear that cryptocurrencies are behaving like technology stocks which have also witnessed a downturn.

On the positive side, even with the increase of 0.50% in the interest rate, BTC price demonstrated stability and even saw a slight surge. The more important concern for investors is what's next on the cards and if there will be any more interest rate hikes in the future. While the Fed has outright refused the possibility of a 0.75% increase, investors remain uncertain. Here are a few steps you can take in these times:

  • Long-Term Focus

There are robust fundamentals that are going to continue to drive the economy forwards. From low unemployment rate and record corporate profits to stable currencies and eager consumers, it would be a better approach for investors to have a long-term game plan instead of focusing too much on the recent price volatility of assets.

Short-term losses can cause anxiety, but letting emotions guide investment decisions can prove costly. A key factor in coping with market volatility is to focus on long-term results rather than the daily fluctuations along the way. Think ahead and keep your eye on the goal.

Great investors look for lucrative investment opportunities during economic downturns. While the crypto market is bearish right now, the strong fundamentals are still there that have enabled the cryptocurrencies to recover and break all past records. Bitcoin lost 75% of its value in 2018 to hit the all-time high of $69,000. 

FAQ

How does Coinpanion work?
We help you to invest in the cryptocurrency market like a professional. Simply select a smart portfolio and get started straight away.

We help you to invest in the cryptocurrency market like a professional. Simply select a smart portfolio and get started straight away.

How much does Coinpanion charge?
If you invest in a portfolio (and not in a single cryptocurrency), a service fee of 2% per year is charged. The fees can be viewed at any time in your transaction history.

If you invest in a portfolio (and not in a single cryptocurrency), a service fee of 2% per year is charged. The fees can be viewed at any time in your transaction history.

Who can invest?
You need to be over 18 and live in a country that is part of the European Union or the European Economic Area (Switzerland, Liechtenstein, Norway, Iceland).

You need to be over 18 and live in a country that is part of the European Union or the European Economic Area (Switzerland, Liechtenstein, Norway, Iceland).

Can companies invest?
Yes, we already have several corporate clients. The minimum investment for corporate accounts is €25.000. Please send us a request to support@coinpanion.com and we will take care of it.

Yes, we already have a large number of corporate clients. The minimum investment for corporate accounts is €25.000. Please send us a request to support@coinpanion.com and we will help your company along the way.

What is the minimum deposit?
The minimum deposit is €50.

The minimum deposit is €50.

How long does it usually take for my transfer to arrive?
That depends on your bank. On average, a transfer takes 1-3 working days.

That depends on your bank. On average, a transfer takes 1-3 working days.

How can I set up a savings plan?
After you have transferred your first deposit, you can easily set up a savings plan in your dashboard. The minimum monthly investment is €10.

After you have transferred your first deposit, you can easily set up a savings plan in your dashboard. The minimum monthly investment is €10.

When will the start bonus or referral bonus be credited?
The start and referral bonus will be credited within 48 hours after receipt of payment.

The start and referral bonus will be credited within 48 hours after receipt of payment.

What happens to my deposits and withdrawals?
Deposits and withdrawals are carried out via third-party providers who take care of the purchase and custody of the cryptocurrencies. Coinpanion takes care of the rest.

Deposits and withdrawals are carried out via third-party providers who take care of the purchase and custody of the cryptocurrencies. Coinpanion takes care of the rest.

How can I deposit money?
We have several payment options for you. You can deposit money with your debit card, credit card and with a direct bank transfer.

We have several payment options for you. You can deposit money with your debit card, credit card and with a direct bank transfer.

How/when can I withdraw?
You can withdraw at any time on your dashboard.

You can withdraw at any time on your dashboard.

Is there a minimum term?
No, you can withdraw at any time.

No, you can withdraw at any time.

In which currencies can I withdraw?
Withdrawals are possible at any time and are currently exclusively in euros.

Withdrawals are possible at any time and are currently exclusively in euros.

What is the difference between the Coinpanion portfolios?
Each portfolio has a unique allocation. You can find out more here.

Each portfolio has a unique allocation. You can find out more here.

Which cryptocurrencies are included in the portfolios?
Coinpanion offers risk and theme-based portfolios. Depending on the portfolio you choose, other cryptocurrencies are included. Learn more about it here.

Coinpanion offers risk and theme-based portfolios. Depending on the portfolio you choose, other cryptocurrencies are included. Learn more about it here.

How is the trading of the portfolios handled?
The cryptocurrencies are traded according to the portfolio's underlying strategy. You can also adjust this via the settings. All cryptocurrencies are traded via third-party providers. You can find more information in the terms and conditions.

The cryptocurrencies are traded according to the portfolio's underlying strategy. You can also adjust this via the settings. All cryptocurrencies are traded via third-party providers. You can find more information in the terms and conditions.

Can I invest in more than one Portfolio?
Yes, you can invest in multiple portfolios at the same time.

Yes, you can invest in multiple portfolios at the same time.

How can I take care of the taxation?
Generally, taxation depends on the legal situation in your country. Coinpanion gives you the possibility to download all transactions directly on the platform. In addition, we have a partnership with the cryptocurrency tax company Blockpit. Through them, we can offer you a complete tax report. In cooperation with Blockpit, Coinpanion offers you a complete tax report free of charge for download.

Generally, taxation depends on the legal situation in your country. Coinpanion gives you the possibility to download all transactions directly on the platform. In addition, we have a partnership with the cryptocurrency tax company Blockpit. Through them, we can offer you a complete tax report. In cooperation with Blockpit, Coinpanion offers you a complete tax report free of charge for download.