- Bitcoin, stocks decline in reaction to higher interest rates warnings by Federal Reserve.
- Bitcoin dropped to $19,526- its lowest price since mid-July, losing more than 70 percent from its ATH.
Bitcoin plunged further to below $20,000 on Monday morning as the US Federal Reserve hinted at higher interest rates. The Fed Chair Jerome Powell warned during a top central banker’s conference that the central bank is set to take strict steps to fight inflation. According to Powell, the move will bring “some pain to households and businesses.” He specified that the central bank would use its tools “forcefully” to address the inflation, which has topped its highest in 40 years at 10.1 percent.
In agreement with Powell, European Central Bank board member Isabel Schnabel also emphasizes the need for higher interest rates to fight inflation. The board member stated that the bank needs to tackle inflation aggressively, even if it involves dragging economies into recession.
Federal Reserve comment on interest rate triggers Bitcoin sell-off
Bitcoin fell below the $20,000 price level as investors let go of risk assets on news of aggressive decisions by the Federal Reserve. The cryptocurrency shed about 5 percent to reach $19,526, a price level last seen on July 13th. It has devalued by over 50 percent in 2022 and decreased about 70 percent from its ATH of $68,990,90. The crypto decline was across other major crypto assets, with Ethereum (ETH) reducing to its lowest in a month at $1,423.
The stock markets are also trembling, with a big sell-off in the US and Europe. While the Dow Jones Industrial Average lost 1,000 points on Friday after the speech, the German DAX index fell over 1.3 percent. Additionally, FTSE MIB shrank by 1 percent, and CAC 40 index diminished by 1.6 percent.
Many experts, including Senior market analyst at Oanda, Edward Moya, linked the Bitcoin loss to the Federal Reserve statement on higher interest rates.
Bitcoin weakened after Fed Chair Powell didn’t blink with his reiteration that the Fed will tighten policy to bring down inflation. Risky assets are struggling as Powell’s fight against inflation will remain aggressive even as it will trigger an economic slowdown.
SchiffGold founder Peter Schiff has highlighted some factors that suggest Bitcoin may not rebound from its current trading price. The Bitcoin critic took to Twitter to express his belief that there are more Bitcoin sellers than buyers. He believes that many more people still want to sell their BTC holdings at the current price other than buyers at the $20,000 level.
There still seems to be a lot of buyers for #Bitcoin below $20K. But there are also a lot of sellers above $20K. I think the market runs out of buyers before it runs out of sellers. What do you think happens first?
— Peter Schiff (@PeterSchiff) August 28, 2022
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Furthermore, Wall Street has predicted different rate hikes for the year. Bank of America, Goldman Sachs, and UBS expect at least 100 bps rate hikes by the end of the year. Also, Wall Street produced a 50 or 75 bps rate hike in September. Experts also look forward to a 25-25 bps rate hike in November and December.