Canada Markets closed

Bitcoin down as investors worry about Fed's inflation steps

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • ETH-EUR
  • ETH-GBP
  • GBP=X
  • GBPUSD=X
  • MSTR
  • BTC-EUR
  • BTC-USD
  • BTC-CAD
  • ETH-USD
  • ETH-CAD
A faster Fed taper and increased interest rate hike expectations is bad news for bitcoin, said one analyst. Photo: Getty Images
A faster Fed taper and interest rate hike is bad news for bitcoin, said one analyst. Photo: Getty Images

Bitcoin was down on Wednesday after the US Federal Reserve said it may hasten the reduction of its asset purchase policies that have boosted the markets for risky assets, as it looks to curb inflation.

Bitcoin (BTC-USD) was down 0.3% at the time of writing, trading at $56,889 (£42,696). This is a reduction of 18% from its all-time high of $69,000, which it hit last month. Ethereum (ETH-USD), the second largest crypto by market cap, surged almost 6% to trade at $44,735.

Fed chair Jerome Powell warned on Tuesday that the risk of higher inflation has increased.

“A faster Fed taper and increased [interest] rate hike expectations is bad news for bitcoin,” said Edward Moya, senior market analyst at foreign-exchange broker Oanda.

Bitcoin's prices were lower on Wednesday morning. Chart: Yahoo Finance UK
Bitcoin's prices were lower on Wednesday morning. Chart: Yahoo Finance UK

Billionaire crypto investor Mike Novogratz also warned Powell's comments could hit the crypto market next year.

"We have inflation showing up, you know, in pretty bad ways in the US," he said, adding that if the Fed decides to curb higher prices it “would slow all assets down. It would slow the Nasdaq down. It would slow crypto down, if we have to start raising rates much faster than we thought."

Kunal Sawhney, CEO at Kalkine Group, told Yahoo Finance UK that "bitcoin prices declining by more than 15% from their all-time high in less than a month’s time clearly indicates the tip-toeing behaviour of crypto investors.

"With conventional asset classes witnessing massive wipe-out in the market value, cryptocurrencies are likely to be impacted in the near term as the situation."

He also said increased regulatory scrutiny is affecting bitcoin.

"The persisting volatility in cryptocurrencies has been largely due to increased coverage by regulators, with several leading economies looking forward to introducing a bill to maximise the know-how around crypto asset, as none of them are being regulated by any national or international jurisdiction."

Read more: Live crypto prices

Meanwhile, the emergence of the Omicron variant is making investors jittery as they partly shift their focus to haven assets. 

This, coupled with uncertainty regarding the upcoming cryptocurrency bill in the Indian parliament, has "impacted the resilient run of bitcoin."

Meanwhile, Naeem Aslam noted that as cryptocurrencies shatter their previous records, companies linked to bitcoin and other digital currencies have also been rising in value. One example of this is MicroStrategy.

Microstrategy (MSTR) has the greatest exposure to bitcoin on its balance sheet. In the recent dip in crypto prices, the company purchased $414m worth of bitcoin.

"Investors should note that MicroStrategy now holds about 121,044 tokens, worth a whopping $7bn. If Bitcoin prices continue to climb from the dip in prices seen during the Thanksgiving holiday, the company will have potentially doubled its profits considering the mean price paid by the company to acquire the digital assets," said Aslam.

After MicroStrategy announced its recent purchase, its stock price jumped roughly 4.5%.

Watch: What are the risks of investing in cryptocurrency?

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting