Bitcoin plunges as the Fed confirms plans to hike interest rates
- The Federal Reserve Chairman confirmed that plans to hike interest rates are coming into play this March.
- Crypto markets, as well as stocks, reacted, with token prices plunging.
- At the time of writing, Bitcoin is down 3.15% and Ethereum 5.25%.
Following a two-day Federal Open Market Committee (FOMC) meeting that concluded Wednesday, Federal Reserve Chair Jerome Powell issued a press conference to speak on the country’s plans in monetary policy. Powell said the Fed would halt asset purchases by March and also hold off on plans to hike interest rates till then.
In the lead up to yesterday’s press conference, the markets were bullish and looked optimistic. Actually, minutes into the press conference, Bitcoin price ascended, clocking a $38,740 peak.
However, half an hour into the briefing, the markets started turning red and have largely remained so since then.
At the time of writing, aggregator platform CoinMarketCap shows that BTC has erased over 3% in gains in the last 24 hours and is trading at $36,820. The tune is not any different for Ethereum, as it has also been on a downtrend and is holding the $2,480 price point, down 5.5% on the day.
Even stocks which have shown a relatively high correlation factor with Bitcoin rose and dipped prior to and during the meeting.
Plans of the hiked rate set off the slump
The downturn in the markets was triggered by the revelation that from March, the Fed will vacate the near-zero interest rates and establish newer hiked rates to battle the rising inflation levels.
“I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so,“ Powell said.
However, the announcement was nothing new as the Fed had already publicised the tapering plan – to end asset purchases and the decision on rates.
At the moment, inflation is riding way about the Fed’s 2% target. Therefore, the central bank expects that jacking up the benchmark rates would help prevent the current high prices from becoming deep-seated.
Altcoin market performance
Alongside market giants Ethereum and Bitcoin, prices of altcoins against the dollar declined following the Fed’s announcement.
Solana is seeing the worst of the effects among the top 10 crypto assets by market cap. According to data provided by CoinMarketCap, SOL is exchanging hands at $92.6, an 8.3% decline in the last 24 hours.
The blockchain’s recent outages are not doing the network any favours as it continues swimming in a red sea.
Terra’s LUNA has fallen below the $60 crucial level, and Polygon’s MATIC, at $1.6, is trading 2.7% below its price 24 hours ago. Seeing a drop of roughly 5 % in the same period, Cardano (ADA) is hardly holding the $1.05 support – trading $1.07.