Bitcoin tumbles nearly 9% and other cryptos plunge as hawkish Fed minutes whack risky assets | Currency News | Financial and Business News

Bitcoin tumbled Wednesday through Thursday.

  • Bitcoin plunged as much as 9% Thursday after the Federal Reserve released “hardcore” minutes on Wednesday.
  • Ethereum, Cardano, Binance, Solana and other cryptocurrencies were also deep in the red.
  • The Fed plans to scale back its support for the economy, causing problems for risky assets.

Bitcoin plunged as much as 9% Thursday and the broader cryptocurrency market was all in the red, minutes after revealing that the Federal Reserve may soon start scaling back its support for the economy.

The world’s largest cryptocurrency by market capitalization is down 7.3% in 24 hours to 11.10 AM ET on the Coinbase exchange, trading at $42,928. Earlier Thursday, it was as low as $42,433. The sharp drop has put bitcoin more than 35% below the record high near $69,000 in November.

Ethereum, the second largest token, fell more than 10% to $3,395. Solana is down about 11%, while binance and XRP are down about 4% each.

Cryptocurrency selling began on Wednesday after the Federal Reserve released “tough” minutes from its December meeting, which showed the US central bank could tighten monetary policy faster than previously expected.

In December, the US central bank said it would accelerate cuts in its bond purchases and indicated interest rates would rise in 2022 as it grapples with the strongest inflation in 39 years.

However, the minutes released on Wednesday show that policy makers can go further and faster than that, and the central bank may start selling the bonds it bought during the coronavirus crisis.

“The federal funds rate may be justified sooner or faster than participants anticipated earlier,” they said.

Read more: 9 Cryptocurrency Experts Tell Us Their Investment Prospects For 2022, From Bitcoin Price Predictions To Highly Convinced Cryptocurrency Picks And What’s Next For Regulation

The reaction in the markets was swift. Bond yields soared and cryptocurrencies and tech stocks – the two asset classes that benefited most from the Fed’s ultra-loose monetary policy – were sabotaged. The technology heavyweight Nasdaq 100 Index rose 0.66% on Thursday as it regained some of its gains.

Analysts said higher bond yields are making cryptocurrencies and unprofitable tech companies look less attractive. Instead, investors are turning to companies that can benefit from economic growth and generate good returns as inflation continues.

“We see bitcoin as akin to small-cap tech stocks,” said Shaun Farrell, Head of Digital Asset Strategy at Fundstrat.

Jeffrey Haley, chief market analyst at Oanda, said the “buy-everything trade” is in its final stages. “Little puppies… raised in the Eternal Central Bank Pond [quantitative easing]They will have to learn the meaning of the term “two-way price volatility”.

Marcus Sotirio, an analyst at digital asset broker GlobalBlock, said high levels of borrowing in the cryptocurrency markets exacerbated the selloff. He said there was “a significant amount of leverage being erased from the market”.