Following an important announcement from the Federal Reserve, the price of Bitcoin weakened, hitting $37,775 on Wednesday afternoon. Bitcoin is up 1.3 percent over the prior 24 hours, according to CoinMarketCap, though it’s more than $1,000 lower than its highest levels of the day. Other major cryptocurrencies, including Ethereum and Solana, held some of their gains from earlier, but trading was mixed among the largest digital currencies.
The Fed said that it was proceeding with a previously announced taper of bond purchases and that it expected to raise rates “soon.” The expectation of higher rates and lower liquidity has dimmed traders’ enthusiasm for cryptocurrency in recent months. But that hasn’t flagged the spirits of Cathie Wood’s ARK Invest, which predicted on Tuesday that Bitcoin’s price would soar to $1 million by 2030.
Ethereum was trading at $2,589 Wednesday afternoon, up 4.6 percent over the prior 24 hours. The second-largest cryptocurrency is still down 47 percent from its 52-week high of almost $4,900 and has declined 30 percent so far this year.
Meanwhile, Solana traded at $98.10 in the mid-afternoon, up 2.0 percent over the prior day. It’s well off its recent high of $260, and has reportedly been facing a number of technical issues.
Other popular cryptocurrencies were mixed over the last 24 hours:
- Cardano – up 5.9 percent
- XRP – up 4.3 percent
- Dogecoin – up 2.6 percent
- Binance Coin – up 0.7 percent
- Avalanche – down 0.9 percent
- Terra – down 4.7 percent
- Cosmos – down 6.0 percent
Bitcoin still well below 52-week high
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. 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 bounced off six-month lows set earlier in the week but remains down nearly 19 percent for the year.
Nevertheless, Bitcoin remains atop the list of most valuable cryptocurrencies by total market capitalization.
Fed signals rate increases, bonds purchases 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 pricing a 91 percent probability of the Fed boosting rates by 25 basis points, with a 2 percent probability of a 50 basis point bump.
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.
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