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Bitcoin Falls To 3-Week Low As Fed Minutes Spook Markets

Published 08/19/2022, 09:03 AM
Updated 04/07/2022, 04:55 AM

Bitcoin plunged almost 8% to $21,404 in the European morning hours, dragging multiple other cryptocurrencies into the red. The cryptocurrency slightly rebounded and traded at $21,801 at the time of the writing. The price drop comes two days after The Federal Open Market Committee (FOMC) released minutes from its July meeting, where it said it plans to continue hiking interest rates to curb the “unacceptably high” inflation.

Fed To Continue Hiking Rates To Rein in Inflation

The world’s largest cryptocurrency Bitcoin lost 7.7% on Friday, dropping to a three-week low of $21,404 in European morning hours. The cryptocurrency later briefly recovered and currently stands at $21,801. Ethereum also fell nearly 6%, trading at $1,738 apiece at the time of writing.

While the exact reason behind the sharp drop in crypto prices remains unknown, it comes just two days after The Federal Open Market Committee (FOMC) published minutes from its last meeting in July. In the release, the central bank committee emphasized that inflation remains significantly high, even though unemployment in the U.S. remains very low.

“Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.”

– The Federal Open Market Committee (FOMC)

It added that inflation remains at unacceptably high levels and significantly above the Fed’s inflation target of 2%. The Fed said it would have to ease interest rate hikes somewhere down the line, though that remains largely dependent on future data. The latest consumer price index (CPI) print showed that inflation slightly eased to 8.5% in July from 9.1% in June.

Investors Continue Steering Clear Of Risky Assets

Equities also fell following the minutes’ release earlier this week. The decline in crypto prices on Friday does not come as a surprise as stocks and crypto have been increasingly correlated in 2022.

Record-high inflation in the U.S. and the rest of the world pushed investors away from riskier assets like technology stocks and cryptocurrencies. Instead, investors significantly increased their cash holdings this year, pushing the U.S dollar to a 20-year high earlier this year.

Apart from inflation and aggressive interest rate hikes, the crypto market drawdown has been exacerbated due to numerous hacks and challenges this year, including the crash of the algorithmic stablecoin TerraUSD (UST) and LUNA. The crypto market cap fell below the $1 trillion level in June for the first time since January 2021.

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Latest comments

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I find it rather funny that every time BTC is up, everyone is bullish, and every time BTC drops down, everyone suddenly becomes a bear, and we hear all the negatives about BTC. The reality is that BTC is the benchmark for crypto, representing approximately 45% of the entire crypto market. When BTC goes up, so do the majority of other cryptocurrencies; when BTC drops, so does the rest of the crypto market. I believe that BTC will continue to be the benchmark for crypto, much like the US dollar is the benchmark world currency. Oil, gas, and gold are all denominated in US dollars worldwide. I am very bullish on BTC from these levels ($21,306).
Real Rates are still negative.  That means you lose money just for holding USD, even with the interest rates.  You are better off holding bitcoin, which does not get mass printed into existence, every time the Democrats want to waste more government money, and can't extort more taxpayers to get it.  Look up the 100 year graph of the USD.  Anyone holding it long term will lose.
 It is trading at under 2/3 of its ATH.  That is called a discount.  But whatever, dude.  Just don't come crying to me, when it finally DOES bounce, and you are desperate to cover.
Bitcoin and its precious network gets copied and inflated 100% every time it forks, it had forked multiple times already. Even the dollar during covid doesnt inflate like that. But dont listen to me. Bitcoin is “cheap.” Buy more.
  I can see where you are coming from. But, don't forget that BTC has made many millionaires. It also had a good run from these levels last time.
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