Bitcoin Falls Back To $40,000 As Fed Mulls Faster Rate Bumps


Cryptocurrency markets were slow on Friday after Federal Reserve Chairman Jerome Powell stated that interest rate hikes should be done “more quickly.”

Powell also noted that a 0.5 percentage point rate hike was “on the table” for the next month.

James Bullard, president of the Federal Reserve Bank of St. Louis, said Tuesday that he expects interest rates to reach 3.5 percent by the end of the year.

Bitcoin fell to $40,586 on Friday, down from a daily high of $42,965 at noon, while the entire cryptocurrency market slipped to $1.88 trillion.

On Tuesday morning, the bitcoin price fell below the $40K level before recovering a few hours later. Bitcoin hovered above $42,000 on Thursday.

Make or break Bitcoin

The $40,000 barrier has emerged as a hit or a break point for Bitcoin, market watchers say, as its performance from there could set the tone for whether the market reaches another bullish or bearish phase.

With inflation soaring, stocks crashing, and investors clueless about how quickly the central bank will raise interest rates, many would argue that now is the perfect time to invest in bitcoin.

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However, the world’s most valuable digital asset has lost nearly 20% of its value this year so far, dropping to $33,000 on January 25 before recovering. Bitcoin reached an all-time high of around $69,000 on November 8 last year, just over three months ago.

BTC total market cap at $775.76 billion on the daily chart | Source: TradingView.com

Bitcoin trading history has been turbulent and volatile since its inception. Cryptocurrency as an asset class continues to evolve closely with the forces affecting its prices.

Cryptocurrencies continued to track the recent decline in the tech industry, with the Nasdaq down 2% on Friday, the most since mid-March.

Raise the rate to contain inflation

Interest rates are being raised to counter rising inflation, which reached 8.5 percent last month. On the other hand, high growth investments, such as technology, are valued using the discounted cash flow concept.

Investors have been grappling with rising inflation, geopolitical issues, and concerns about a central bank tightening of monetary policy.

The Federal Reserve’s meeting minutes released last week revealed its intention to cut its balance sheet by $95 billion per month to contain inflation.

Meanwhile, in another development, Elon Musk’s electric car company Tesla is dealing with Bitcoin.

On the company’s balance sheet, the total digital assets are $1.261 billion. Since the first three months of last year, the EV giant in Austin, Texas has not bought or sold any crypto assets.

Suggest reading | Crypto Quick Look: BTC Reaches $42,000, ETH Notches 10-Day Peak

Featured image from Investors King, chart from TradingView.com



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