Bitcoin price falls as stocks drag down cryptos. Just wait for the Fed minutes.
Bitcoin
and other cryptocurrencies fell on Wednesday, after stocks slipped into the red amid growing investor concerns about higher interest rates. Minutes from the last meeting of the Federal Reserve’s policy committee lie ahead as a key catalyst.
The price of Bitcoin has fallen 2.2% in the past 24 hours to $24,165, falling from recent highs above $25,000 and returning to levels of a week ago. Bitcoin’s gains so far this year have solidly consolidated the biggest digital asset above the key $20,000 mark, with the rally to start 2023 as much as 50% higher to above $25,000 – the highest levels since last summer.
“Bitcoin fell after a false breakout above the August high,” said Yuya Hasegawa, analyst at crypto exchange Bitbank. “Bitcoin still manages to stop the fall above its previous low…improving technical sentiment may still support the price in the short term.”
Despite having surpassed
Dow Jones Industrial Average
and
S&P 500
in recent days, Bitcoin has fallen back to old ways, trading in sync with the stock market. Digital assets and stocks were largely correlated over the past year amid a tough macroeconomic backdrop of high inflation and rising interest rates, with investor concerns over the future of interest rates driving the latest rout.
Higher interest rates produce higher returns on risk-free bets – such as government bond yields – and dampen demand for higher-risk bets such as stocks, to say nothing of volatile cryptocurrencies. While investors had turned bullish on risk-sensitive assets amid expectations that the Federal Reserve will ease aggressive monetary policy this year, mixed messages in inflation data have raised fears that interest rates will go higher for longer. That will likely lead to more pain for cryptos.
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While more inflation indicators will arrive later this week — in the form of the Fed’s preferred measure of inflation, the personal consumption expenditures (PCE), due on Friday — investors are more immediately looking at something else.
The minutes of the latest meeting of the Fed’s interest rate committee will be released at 2pm Eastern, with investors likely to scrutinize the tone of central bank officials and focus in particular on concerns expressed about loosening economic conditions. Indications of a commitment to smaller interest rate increases of 25 basis points would also be welcome amid growing expectations of a larger increase in March.
Still, some market participants are optimistic that the roaring rally in cryptos that began this year — which some have called the start of a new bull market — has more staying power than sensitivities to Fed policy might suggest.
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“Even if the Federal Reserve chooses to raise interest rates next by 50 basis points, I’m not sure this will put much of a damper on what appears to be a sustained, if relatively measured, upward move in Bitcoin and other cryptoassets ,” said Vineeth Bhuvanagiri, CEO of Emurgo, the commercial arm of the Cardano blockchain. “Conditions are ripe not only for a Bitcoin and crypto recovery, but also a sustained rally of sorts for some time.”
Beyond Bitcoin,
Ether
-the second biggest crypto loss 2% to $1650. Smaller cryptos or altcoins also fell, too
Cardano
down 2% and
Polygon
decreasing 5%. Memecoins were more mixed, with
Dogecoin
up less than 1%, however
Shiba Inu
reduction 2%.
Write to Jack Denton at [email protected]
