‘Worse than 2008’—Huge Fed ‘Sledgehammer’ Coming for Bitcoin, Ethereum and Crypto Price
Bitcoin, ethereum and other major cryptocurrencies have suffered an almighty price crash this year, wiping out about $2 trillion from the combined crypto market — with the Biden administration warning traders.
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The price of bitcoin, down 70% from its all-time high late last year, has repeatedly failed to hold ground above $20,000 per bitcoin while the price of ethereum has crashed following a strong warning from the chairman of the US Securities and Exchange Commission (SEC) Gary Gensler.
Now the bitcoin, ethereum and crypto markets are braced for the Federal Reserve to unleash a ‘sledgehammer’ that could further tank prices (although some are still hoping for a turnaround) in the ongoing war against stubbornly high inflation – with one analyst predicting the fallout could be worse than the great financial crisis of 2008.
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The markets fear that a “sledgehammer” from the Federal Reserve could hold the price of bitcoin, ethereum and others … [+]
“We have to move to the big macro picture and what has pushed the cryptos this year, which is the Fed hammer,” said senior commodities analyst Mike McGlone at Bloomberg Intelligence. Kitko.
The Fed, led by Chairman Jerome Powell, has this year embarked on a program of historic rate hikes as it battles soaring inflation that has shot to a 40-year high.
Last week, the inflation report for August showed that prices continued to run higher than expected, potentially forcing the Fed into another big rate hike at its meeting this week. The Fed’s Federal Open Market Committee will announce its latest decision on Wednesday with markets predicting a 75 basis point hike, which would take interest rates above 4% – a level not seen since before 2008.
Bitcoin, ethereum, other major cryptocurrencies and stock markets have been hit hard by the Fed’s monetary tightening mission this year, designed to siphon liquidity from the system, with high-growth tech stocks and crypto-leading markets lower.
“There has been another bout of anxiety in financial markets amid concerns that inflation is still proving a formidable adversary to bring down,” Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, said by email.
“Crypto assets remain highly intertwined with the fortunes of stock markets, and given that they are seen as highly risky assets, there has been a flight from the crypto wild west as investors seek less turbulent places to put their money.”
The Fed and other central banks pumped cash into the financial system during the Covid-19 pandemic, inflating prices across the board, and if the Fed’s rate hikes trigger a recession and a market meltdown, McGlone fears it’s out of dry powder.
“I think it’s going to be worse than the 2008 correction, worse than the Great Financial Crisis,” McGlone said, adding, “The Fed started easing in 2007, and then they added massive liquidity. They can’t do that anymore. “
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Bitcoin price has crashed back this year after a big run through 2021, which has pulled down … [+]
However, McGlone went on to predict that the bitcoin price could return to a new record high of $100,000 by 2025 and remains bullish on ethereum in the long term, pointing to the potential for institutional adoption.
For now, the bitcoin price has fallen to recent lows of just under $20,000 over the past week, and some fear a further drop is on the way.
“Despite a pause in the selloff, the technical balance of power is on the side of the bears, with the potential to renew the June lows and enter the $12,000-$14,000 per bitcoin range,” Alex Kuptsikevich, FxPro senior market analyst, said in comments on e -mail.
