The $300 billion cryptocurrency price drop is suddenly accelerating as Bitcoin, Ethereum and XRP traders prepare for a Fed shock
BitcoinBTC and major cryptocurrencies – including Ethereum and XRPXRP – have fallen sharply as traders brace for a correction (and a potentially brutal crackdown from the Biden administration).
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Bitcoin price has plunged over 10% since this time last week despite JPMorgan's CEO making a surprise Bitcoin move, with the downward trend suddenly accelerating and $300 billion off the combined Bitcoin, Ethereum, peak of $2.8 trillion earlier this month.
Now that Elon Musk is making a dramatic return to the crypto market, Bitcoin, Ethereum, XRP and crypto traders are awaiting the Federal Reserve's interest rate decision on Wednesday, which could send prices further lower.
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Federal Reserve Chairman Jerome Powell will announce the Fed's latest interest rate decision … [+]
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In parallel with Wednesday's Fed rate decision, which is widely expected to leave interest rates unchanged, officials will update their forecast for the coming months, which currently calls for three rate cuts in 2024.
However, a Financial Times survey of economists found that the Fed will be forced to keep interest rates high for longer than markets and central bankers expect. Rising expectations that the Fed will declare victory in the fight against inflation have pushed crypto and stock markets to record highs in recent weeks.
However, last week, US inflation data from the Consumer Price Index (CPI) and Producer Price Index (PPI) both showed higher than expected price increases.
Meanwhile, Japan's central bank raised interest rates for the first time since 2007, tightening monetary policy as deflation fears eased and inflation rose.
“The high inflation rate in the U.S. could prompt the Federal Reserve and other central banks to raise interest rates, which could potentially slow price appreciation and lead to some decline in crypto prices,” said Tristan Frizza, the managing director of Zeta Markets, in via E comments sent via email.
“However, the direct impact of inflation on consumers and the erosion of their wealth may prompt them to invest more in cryptocurrencies to offset this impact. The prevailing narrative that Bitcoin and other cryptocurrencies are “immune” to inflation, along with increasing market interest and institutional involvement in crypto, could encourage greater participation in crypto markets.”
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Bitcoin price has fallen sharply in the last week, dragging down Ethereum, XRP and others … [+]
Forbes Digital Assets
The Bitcoin and crypto market has received a major boost from the debut of a fleet of Bitcoin spot exchange-traded funds (ETFs) on Wall Street this year. The new Bitcoin ETFs have raised billions of dollars, with the largest becoming one of the fastest-growing ETFs in history.
“In recent months, the launch of the spot Bitcoin ETF in the US and the US Federal Reserve’s monetary policy shift have shifted crypto sentiment from cautious optimism to euphoria,” said Ed Hindi, chief investment officer at Tyr Capital, in via Emailed comments and pointed out the crypto fear and greed index, which is currently in extreme greed territory. “In the past, this has led to short-term slowdowns.
However, Hindi remains confident that this is only a temporary dip before Bitcoin price and the broader crypto market resume its upward trend.
“We expect the coming year to bring new all-time highs for Bitcoin and Ethereum and much broader institutional participation in crypto assets. In our opinion, Ethereum and other altcoins.” [smaller cryptocurrencies] will outperform Bitcoin.”
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