Bitcoin price collapsed to fresh three-month lows on Saturday, extending its free fall since Wednesday when the US Federal Reserve sparked a massive sell-off on news that it would reverse policy to boost the economy amid the pandemic.
Fed officials signaled that they were ready to remove pandemic-era stimulus sooner than expected, leading to faster rate increases early on to combat inflation. This should increase the cost of capital, thus alienating investors from cryptocurrencies.
As a result, many experts expect the cryptocurrency free fall to continue for weeks.
Crypto Crash 2022: $1 trillion in value wiped out
Bitcoin is also down three percent to around $41,000 on Saturday, according to CoinMarketCap figures. It has since fallen 12% since the Federal Reserve hinted at their move to withdraw stimulus. It peaked at nearly $70,000 per bitcoin in November, and has lost 40 percent since then. Ethereum and other cryptocurrencies have also fallen dramatically, wiping out $1 trillion in value from their peaks two months ago, Forbes reported.
In a separate report for Forbes, analyst Yuya Hasegawa of crypto broker Bitbank warns that Bitcoin may continue to slide until the broader market absorbs a potential price hike by March. He said that bitcoin could drop as low as $40,000 in the near term. However, the release of the Consumer Price Index report from the US government could trigger a rush if it reveals that inflation has increased more than expected, sparking inflation fears that have led to a record high for Bitcoin in the past.
Also Read: Ethereum and Bitcoin Price Crash Amid Threat of Higher Interest; But Bitcoin whale buys dip
Galaxy Digital CEO and crypto billionaire Mike Novogratz said the sale could lead to an additional eight percent drop in bitcoin to $38,000, a new low for the world’s largest cryptocurrency since August. While Novogratz indicated he was “not nervous” about the medium term, “a lot of volatility” is expected in the next few weeks. Despite this, he remained optimistic about the future of the cryptocurrency given its burgeoning institutional adoption.
Several other experts have also considered these ongoing developments at the Federal Reserve to be beneficial to Bitcoin and other cryptocurrencies. As Bitcoin evolves into a digital reserve asset, this could have a positive impact on its price, according to a Fortune report citing Bloomberg Intelligence’s Mike McGlone as saying.
Bitcoin Price Prediction: $100,000 per coin despite Fed policy concerns
McGlone said in a note that Bitcoin is still “heading towards $100,000”. He added that since cryptocurrencies are among the most risky and speculative assets, they should motivate the Fed to fight inflation. As a global reserve asset, “Bitcoin could be the main beneficiary in this scenario,” McGlone emphasized.
Another analyst, Zach Pandl of Goldman Sachs, shared the same prediction, saying that the bitcoin price could reach $100,000 if market share is taken away from gold.
But other experts have been quite realistic about the situation, arguing that the stimulus that is quickly becoming less abundant than expected will cause assets like cryptocurrency to collapse in tandem.
Investors have already been nervous since the beginning of 2022, due to the uncertainty about Fed policy directions, Lindsey Bell, chief markets and financial strategist, said in the Fortune report. She said investors are reassessing the risks they might choose. And the continued rally of the US dollar did not help, assuring that it remains the “world currency” and will never fade away. Because of this, they do not need to “hide their money under the mattress or in cryptocurrency.”
Related Article: Bitcoin, Ethereum and Top Cryptocurrencies Continue Free Fall in the Crypto Crash: $500 Billion Eliminated