On March 24, analyst Marcel Pechman suggested in his CoinTelegraph Markets and Research video that monitoring the Global M2 Monetary Base data is particularly important. Otherwise, this may result in reduced assets in cryptocurrency and decreasing faith in the financial system, as seen in the brief dip of Bitcoin (BTC) and Polygon (MATIC) in the past week.??
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Rate on Reserve Balances?
The Federal Reserve voted to increase the Rate on Reserve Balances (IORB rate) by 25 basis points during the Federal Open Market Committee (FOMC) meeting last week. Its 4.90% rate is now its tallest rise in over a decade.?
Shortly after that, the central bank's influence compelled other countries, specifically in the Gulf area, to follow suit to protect their currencies’ pegs against the US dollar.?
Ramifications of the Fed’s Rate Hike on Monetary Supply?
Due to the increased IORB and change in monetary policy by the Fed, the need for money supply spiked up, which can, thereafter, inflate the prices of goods and commodities. The rate increase can also make it pricier for consumers to take out auto, home, or student loans.?
This fact is asynchronous to the video CoinTelegraph expert Pechman made where he also said that the only way the US Federal Reserve can avoid a larger crisis is to increase the monetary base — the money in circulation. It can happen via lower interest rates or money printing, which raises the M0, also known as the monetary base.?
Impact of the Money Supply on Bitcoin and Polygon?
The money supply is one of the factors that can affect the value of crypto, in particular, and the state of the crypto market, in general. Cryptocurrencies such as BTC (21,000,000 BTC coins) and MATIC (10,000,000,000 MATIC coins) have a limited supply, which means that there is a maximum amount of coins that can ever be in circulation.?
An increase in the money supply means that there are more BTC and MATIC coins available for purchase, which can lead to a decrease in demand and a subsequent decrease in price. On the other hand, when the money supply of a cryptocurrency decreases, it can lead to an increase in the value of BTC and Matic coins. This is because a decrease in supply means that there are fewer coins available for purchase, which can lead to an increase in demand and a subsequent price increase. Nevertheless, things could still boil down to how and what crypto whales are up to.?
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