Federal Reserve’s Rate Hike Hint Sends Cryptos Crashing

Mumbai: Cryptocurrencies including Bitcoin, Ethereum, Solana, Cardano and Terra slid sharply on Wednesday night, after the US Federal Reserve released minutes of its December meeting in which the central bank signaled it could start raising interest rates to tackle stubbornly high inflation.

At 5 pm Thursday, Bitcoin was down 8.49% at $42,835. It had earlier tested the $42,500 levels, after the Fed released its minutes.

Bitcoin reached an all-time high of $68,749 on November 11, 2021 and has outperformed all capital markets in terms of yearly price growth in 2021, with a 60% return.

Other alt coins as well reacted strongly to the news: Ethereum, Cardano, Solano, Shiba Inu, Cardano and Binance Coin all dropped by 10% or more during the 48 hours till Thursday evening.

At 5 pm, the Coinbase tracker showed a 9.80% drop in the overall crypto market in the previous 24 hours.

Bitcoin has been under pressure lately due to key central banks indicating that they are going to move away from low interest rates and that their bond buying programmes will gradually taper off.

Experts say the fall was expected since the market had been range-bound and very volatile on the last few days.

“The market going down is mostly being attributed to the US Federal Reserve’s plan to hike interest rates this year to target rising inflation. Like any assets, macroeconomic factors affect the crypto too. Investors must keep in mind that risk and reward go hand in hand and that they need to do their own research before buying into any assets – not just crypto,” said Ashish Singhal, founder and chief executive of Coin Switch.

Experts say that selling pressure was largely due to US and European investors booking profits. “The correction was imminent. From December 16 onwards, the market has been range-bound and choppy.

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