Bitcoin Slips Below $29,000 as Fed Maintains Hawkish Stance
Bitcoin slipped below $29,000 early Thursday alongside stocks after the U.S. Federal Reserve suggested maintaining its hawkish stance in the meeting minutes released on August 16. The downturn dragged the broader crypto market down with it, as the total market capitalization dropped by 1.7% overnight, or nearly $20 billion, per CoinGecko.
- Bitcoin dropped by 2% overnight and is now trading at $28,549.
- Ethereum price is also struggling to hold on to the $1,800 support level, last trading at $1,795 after dropping 1.5% in the last 24 hours.
- In the equities market, the S&P 500 index continued its downturn from Tuesday, dropping 0.76%.
- The dollar index (DXY) against other major currencies gained 0.54% this week from Fed’s rate expectations, hitting a one-month high yesterday.
During the Fed policy rate meeting last month, it increased the benchmark interest rate to a 22-year high, bringing the interest rate to 5.25%-5.50%. The central bank’s rate hikes have been one of the most significant factors limiting the rise of risk assets such as stocks and cryptocurrencies. However, the latest meeting minutes show that the Fed’s decision-making committee “remains highly attentive to inflation risks.”
The market’s expectation of a rate hike has increased after the release of the minutes. CME’s FEDWatch tool shows that traders increased their rate hike expectations from 10% to 13.5% after the release.
Hot Take: Market Reacts to Fed’s Hawkish Stance
The crypto market, including Bitcoin and Ethereum, experienced a downturn as the U.S. Federal Reserve maintained its hawkish stance. The Fed’s decision to increase the benchmark interest rate has limited the rise of risk assets and attracted investors to safer bets. While the market expected the rate hike to be one of the last, the meeting minutes indicate that the Fed remains highly attentive to inflation risks. This has increased the market’s expectation of a rate hike, as reflected in traders’ rate hike expectations. The market will closely monitor the Fed’s actions in the coming months to assess the impact on cryptocurrencies and other assets.
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