Bitcoin price dips near $38,000, altcoins show mixed results
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The price of Bitcoin was $38,423 on Wednesday morning, following nearly a day of hovering around that level. It was a loss of 1.2 percent over the prior 24 hours, according to CoinMarketCap. The world’s largest cryptocurrency has been looking for direction over the last few days, while the price of other major cryptocurrencies was mixed.
The price of Ethereum was essentially flat, at $2,777, on Wednesday morning. The second-largest digital currency remains significantly below its all-time high of nearly $4,900 reached in early November. It’s fallen 25 percent so far in 2022.
Altcoins to watch
Other top cryptocurrencies were largely higher, but most gains were modest:
- Avalanche – up 4.2 percent
- Polkadot – up 3.2 percent
- Shiba Inu – up 2.9 percent
- Terra – up 1.4 percent
- Solana – up 1.2 percent
- Cardano – up 0.9 percent
- XRP – up 0.5 percent
- Dogecoin – up 0.5 percent
- Binance Coin – down 1.0 percent
Cryptocurrency has struggled since it became clear last November that the Federal Reserve intended to reduce financial stimulus. On Wednesday, India confirmed that it wasn’t banning cryptocurrency but instead plans to tax capital gains on it at a hefty 30 percent rate. The Indian government also announced that it was creating its own blockchain-based cryptocurrency, a “digital rupee.”
Traders are also waiting to hear how the Biden administration will proceed with cryptocurrency regulation, following reports that it will file an executive order directing the federal government to set new policies on emerging digital currencies.
Bitcoin stuck below $40,000
Bitcoin’s price has been under serious pressure since the Fed’s early November 2021 meeting. The cryptocurrency topped out at nearly $69,000 in November.
From there, it’s been mostly downhill. The downtrend continued through much of December and into January. After peaking above $51,000 in late December, the digital currency fell to nearly $33,000 in late January. Bitcoin remains down more than 17 percent since the start of the year.
Nevertheless, Bitcoin remains atop the list of most valuable cryptocurrencies by total market capitalization.
Fed signals rate increases on the way, bond buying to end
At its January meeting, the Fed announced that it was continuing to taper its purchases of bonds and expects to stop buying bonds by early March. The central bank also indicated that it was poised to increase rates soon, signaling what many experts expect will be a rate hike as early as March.
“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” said the Federal Open Market Committee in a prepared statement.
Now market analysts are expecting the Fed to increase interest rates at its upcoming March meeting. According to CME’s FedWatch Tool, the market is now pricing in a 100 percent probability that rates will rise in March. The only outstanding question is by how much. The market is expecting a 91 percent probability of a boost of 25 basis points, with the remainder projecting a larger 50-point hike.
“While we’re on the cusp of the Fed beginning to raise interest rates, the more significant step of starting to run off the balance sheet is still to come and the Fed provided no additional details in their post-meeting statement,” says Greg McBride, Bankrate’s chief financial analyst. “The combination of rate hikes and eventually shrinking their asset portfolio will complete the transition from going full throttle to putting the brakes on the economy.”
With inflation rising last year at the highest pace in 40 years, the Fed is looking to dampen price increases but not hit the brakes too hard. The resulting decline in stimulus has roiled financial markets in 2022.
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