Bitcoin and other top cryptocurrencies continued to fall throughout Friday, after plummeting in overnight trading. The world’s largest digital currency, Bitcoin, was trading at $38,356 Friday afternoon – down about 11 percent in the last 24 hours, according to CoinMarketCap. Bitcoin has plunged by more than 17 percent year to date. Many other popular cryptocurrencies have dropped even further, as crypto markets joined other U.S. financial markets in decline.
Markets continue to expect the Fed to raise interest rates, a move that is haunting growth stocks as well as cryptocurrencies. The expectation of rising rates has also hurt bond prices, which move in the opposite direction of rates. And crypto traders may also be worried about statements on Thursday from Russia’s central bank about a proposed ban on cryptocurrencies.
Ethereum’s price crashed some 14 percent lower, down to $2,777 in the mid-afternoon on Friday. The world’s second-largest cryptocurrency hit an all-time high above $4,800 as recently as November but has continued to fall over the last few months. It’s down nearly 25 percent so far in 2022.
On mid-afternoon Friday, Cardano was trading at $1.20 – down a whopping 14.1 percent. Solana fell 12 percent, to $124.29.
Meanwhile, popular memecoin Dogecoin was trading at $0.1513, off 8.8 percent.
Other major cryptocurrencies falling over the last 24 hours include:
- Binance Coin – down 10.3 percent
- Polkadot – down 12.7 percent
- XRP – down 11.6 percent
- Avalanche – down 15.3 percent
Bitcoin prices have been declining for months
Bitcoin’s price has been under serious pressure since the Federal Reserve’s early November meeting, when the central bank announced that it would begin tapering its purchases of bonds, reducing stimulus in the financial system.
That downtrend continued through much of December and into January. After peaking above $51,000 in late December, the digital currency fell to about $41,000 in early January and has spent the past couple weeks hovering in the low $40,000 range around $42,000. This latest drop saw the cryptocurrency trade below the $40,000 level for the first time since August.
On Thursday, the Federal Reserve released its 40-page paper exploring the creation of a “digital dollar,” essentially a cryptocurrency version of the U.S. dollar backed by the central bank. While the Fed has not taken a position on the creation of a currency yet, the paper explores the pros and cons of doing so. Now the Fed is seeking public comment on the topic.
The Fed’s tightening plans with surging inflation hitting the economy
At its December meeting, the Fed announced that it was increasing the pace of its taper, purchasing even fewer bonds than it had projected in November. The new pace means the Fed will stop buying bonds by March 2022.
From there, the Fed has said that it will eventually raise interest rates, as conditions warrant.
“With inflation having exceeded 2 percent for some time, the committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment,” said the Federal Open Market Committee in a prepared statement.
While Bitcoin’s price peaked at $68,990.90 in early November, the cryptocurrency’s value has steadily weakened since then. Nevertheless, Bitcoin remains atop the list of most valuable cryptocurrencies by total market capitalization.
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