How does the US Federal Funds Rate Policy Affect Cryptomarket?

The cryptocurrency market is a rapidly developing phenomenon with its own factors that impact prices and volumes of trading. The few works that have been published since the establishment of cryptocurrency search for similarities and differences with the traditional financial market. One crucial link to the conventional economic framework is the Federal Funds rate, which governs capital flows between established and alternative investment instruments, both domestically and internationally due to the US Dollar's predominant role in global transactions. In this work, the asymmetric effects of Federal Funds rate change on top 55 cryptocurrency price returns were analyzed using random effects model for daily period between February 2017 and October 2022. The selected variables are positive and negative Federal Funds rate changes, returns of the CBOE Volatility index, US Dollar index, oil price and NASDAQ index. According to regressive analysis, negative interest rate provided stronger impact on crypto price return on average than positive interest rate changes. Interestingly, the positive interest rate change substantially lowers its impact on crypto return in the post-COVID period. It is also one of the findings that there is statistically significant difference between impacts of Federal Funds rate change on cryptocurrency returns during some specific weekdays. The results provide important implications for policymakers, portfolio managers, and investors.