Bitcoin’s price fell sharply after the Federal Reserve announced that it would raise interest rates by 75 basis points to combat sky-high inflation.
Following the announcement, the largest cryptocurrency by market cap fell below $19,000 before rebounding amid widespread market volatility. It is currently trading at around $19,039, down about 1% in the last hour. Bitcoin has also dropped 5.7% in the last seven days.
Market analysts predicted that the Fed would raise interest rates again today by 75 to 100 basis points. Though nervous traders sold lower today, Bitcoin, other cryptocurrencies, and stocks appear to have priced in these expectations this week. Stocks fell in response to the news, with the Dow Jones and the S&P 500 both down roughly 0.70% at the time of writing.
Central banks, including the Federal Reserve, have raised interest rates to rein in rising prices.
Because inflation in the United States is at a four-decade high, investors are flocking to safe havens like the US dollar and avoiding “risky” assets like equities and cryptocurrency.
According to researchdata, Bitcoin has been trading like a tech stock this year
According to Arcane Research data, Bitcoin has been trading like a tech stock this year. It has also beat, falling 70% from its all-time high of $69,044 in November 2021.
While the dollar has been steadily rising—and today was no exception: before Fed Chair Jerome Powell spoke, it had already reached a new two-decade high, fueled in part by Russian President Vladmir Putin’s decision to escalate tensions in Ukraine.
According to Edward Moya, OANDA’s senior market analyst for the Americas, the market was “troubling,” but there was light at the end of the tunnel. “I think, for the most part, Wall Street expects the Fed to remain committed to fighting inflation, which is difficult for risky assets like cryptocurrency,” he said.
“It’s a wait-and-see approach: long-term investors are still committed to crypto and will be unfazed by today’s decision; they anticipate that crypto will eventually trade on its fundamentals—not like tech stocks,” he added.
According to Darius Sit of Singapore-based crypto investment firm QCP Capital, while Bitcoin has been trading like a “macro risk asset,” it may “break that correlation” in the future.
After the Fed’s policy decision, Ethereum, the second largest digital asset, did not fare much better.
The asset has lost 1% in the last 24 hours and is now worth $1,328. Despite completing a long-awaited and widely publicized transition to a proof-of-stake blockchain last week, the asset has struggled to gain traction: its price is down 15% in the last seven days.