Definition ∞ Interest rate hikes refer to increases in the benchmark interest rate set by a central bank, typically implemented to combat inflation or cool down an overheating economy. Higher interest rates make borrowing more expensive, which can reduce consumer spending and business investment, thereby slowing economic activity. These adjustments can influence the attractiveness of different asset classes, including risk assets like cryptocurrencies, as investors seek higher returns in traditional savings or bonds. They are a primary tool of monetary policy.
Context ∞ News about central bank interest rate hikes is a critical driver of market sentiment in the cryptocurrency space. Higher rates can make riskier assets, such as digital currencies, less appealing compared to safer, yield-bearing traditional investments. Reports frequently analyze how anticipated or actual rate hikes affect crypto prices, often leading to market corrections or shifts in investor strategies. Understanding this relationship is essential for comprehending broader market dynamics.
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