Key Takeaways
- The price of major crypto tokens dipped as the Fed announced plans to reduce the balance sheet.
- Bitcoin (BTC) and Ethereum (ETH) shed over 10% amind the market crashed as altcoins followed suit
- The minutes of the recent Fed meeting impacted the global stock markets as Nasdaq shed over 3%
YEREVAN (CoinChapter.com) – Cryptocurrency markets saw a continued crash in the market on Thursday. Since Bitcoin (BTC) prices slipped below $47,000 on Wednesday, things have gone only worse.
Both Bitcoin (BTC), and Ethereum (ETH), have shed over 10% since the last green candle on the charts two days ago. Bitcoin’s (BTC) price dipped below the $43,000 mark as its market capitalization slipped below $820 billion. At the same time, BTC’s 24-hour trading volume increased by over 50%, crossing the $40 billion at the time of writing.
While some of it is indicative of people buying the dip, the spike in trading volume indicates massive sell-outs. In anticipation of financial uncertainty, it was clear many investors had opted to cash their profits. As a result, Bitcoin (BTC) lost over 30% of its price since its all-time high of above $67,000 in November.
Etherereum (ETH) also took a similar beating as the ETH price fell almost to $3,200. In the past 24 hours alone, ETH had shed over $240 on its closing price on Wednesday. The 24-hour trade volume shot up over 130%, crossing the $29 billion mark.
Part of the reason why the bloodbath in the cryptocurrency market commenced was the minutes of the US Federal Reserve’s recent meeting. As expected, altcoins also painted the charts in red.
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FED meeting sends cryptocurrency market into turmoil
The recently-published minutes from the Federal Reserve’s policy meeting suggest earlier and faster interest- rate increases in the days to come. The Fed has cited the strengthening economy and increasing inflation to justify the move. Additionally, it has indicated it will be fixing the Central Bank’s balance sheet, sending the cryptocurrency markets swinging.
“Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,”
the minutes of the meeting stated.
The Fed also admitted that the move to reduce the Federal Reserve’s balance sheet by cutting the number of bonds the Fed holds will start sooner than expected.
“Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate,”
the minutes published on Wednesday reads.
According to the recent decision, the Fed could begin raising its benchmark interest rate in the next two months. If the interest rate increase begins in March, the Central Bank’s balance sheet reduction could start as early as summer.
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Global markets dip thanks to Fed minutes
The cryptocurrency market wasn’t the only victim of the Fed meeting minutes that came to light on Wednesday. The Global markets continued to slump after the technology-infested Nasdaq Composite share index dropped 3.3% on Wednesday, the lowest in almost a year.
The Fed announcement had triggered a sell-off in the massive US Treasury bond market as well. Investors also dumped the shares of those companies that had benefited owing to the pandemic lockdowns. With the various variants of the Covid-19 pandemic unlikely to disrupt the economic recovery, investors are now opting for higher-paying stocks. As a result, the energy sector stands to benefit. Oil, among energy resources, has rallied in the process.
Following the footsteps of Nasdaq, the global tech stocks also shed a few points. The European Stoxx 600 dropped over 1% while the Japanese Nikkei 225 index dropped as much as 3%. The jitters of the Fed meeting were also felt in Australia. The local S&P/ASX 200 dived over 2.7% as a result.
However, the uncertainty in the market can potentially continue as the Fed begins implementing new measures.
“Let’s face it, there is still a significant amount of uncertainty out there . . . the possibility of a new variant could be very problematic.And frankly, Fed normalisation by itself will create higher volatility,”
FT quoted Kristina Hooper, the chief global market strategist at Invesco.
With the time frame of quantitative easing still unknown, there will be a lot of speculations in the market. The speculations are sure to impact the cryptocurrency market. Meanwhile, Bitcoin (BTC) will look to consolidate before making any substantial gains.
