Bitcoin and altcoins are plunging again, as Jerome Powell hints at the steps to come this year under the Fed’s quantitative tightening.
After some rebound earlier in the day on Wednesday, the cryptocurrency market plunged again following the announcement of the FED meeting. Its chairman, Jerome Powell, hinted at tough measures coming this year to control inflation. After breaking above the $38,700 level on Wednesday, bitcoin corrected another 4.5% today, dropping below $36,000 on the influence of the FOMC meeting, bitcoin is trading at a price of $35,944, down 4%, and its market capitalization stands at $689 billion.
In response to changing market conditions, Powell spoke of the need to change Fed policy. He said that the first interest rate hike would take place around March 2022. In addition, the Fed Chairman also ended the bond buying program.
He also explained that the Fed was considering reducing its balance sheet. The message is clear: the Fed is likely to take bold quantitative tightening action this year. Aneta Markowska, chief economist at Jeffries, said:
” For now, we maintain our baseline scenario of 4 hikes this year, but we now view it as a floor rather than a ceiling. The Fed did nothing to contain market expectations of 4 bulls, effectively prompting the market to expect even more. »
The US stock market turned red, the Dow Jones Industrial Value Index corrected 300 points. Similarly, the S&P 500 corrected 30 points while the Nasdaq Composite corrected 68 points.
Technology stocks suffered, while banking and energy stocks showed some recovery. As market sentiment turned negative on Wednesday, the ripple effect was seen in the crypto space as well.
The crypto space lost all of its Tuesday gains. Bitcoin and altcoins quickly came under heavy bearish pressure. Despite this recent market volatility, some market analysts continue to remain bullish on bitcoin for this year 2022. Mike McGlone, strategist at Bloomberg Intelligence, said bitcoin is trading at a 30% discount to its average on 20 weeks. The analyst suggested that these could be signs of new support forming.
The fact that #Bitcoin is an up-and-coming asset, with less than $1 trillion market cap vs. about $100 trillion of global equities, that got a bit extended may give the crypto an advantage. Our graphic depicts a bottoming indicator for Bitcoin — about 30% below its 20-week avg. pic.twitter.com/5OzZ2F3gSp
—Mike McGlone (@mikemcglone11) January 25, 2022
Many had predicted that bitcoin would likely hit the $100,000 levels this year. However, the way bitcoin has tracked the US stock market, we can only expect more volatility. Outside of Bitcoin, altcoins also fell sharply.