Bitcoin Price Recovers Above $35,000 as Crypto Rout Shows Signs of Easing

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After plunging over the weekend and into early Monday near $33,000, the price of Bitcoin rebounded, with the world’s largest cryptocurrency climbing to $35,852 by mid-afternoon. This is an increase of around 2.2% from the previous 24 hours, according to CoinMarketCap. Despite the boost, Bitcoin remains well below its all-time high set in November, down 48%. Many other popular cryptocurrencies have pared past losses, but are still seeing substantial declines since the start of 2022.

Traders are hanging on to the next meeting of the Federal Reserve, which meets this week to discuss the direction of the economy and interest rates. Cryptocurrencies have been in a tailspin since the Fed announced it would scale back its financial market stimulus. Reduced stimulus and rising interest rates have hurt crypto prices across the board, and stock markets are lower overall, though they have also rebounded above their lowest levels. bottom of the day.

Ethereum has fallen 2.1% in the past 24 hours to $2,365 on Monday afternoon. The second-largest cryptocurrency has fallen sharply since early November, when it topped $4,800. It has fallen by almost 36% in 2022.

And many other cryptocurrencies fell sharply early in the day – some in the mid-teens percent lower – to pare their losses by mid-afternoon:

Solana – down 7.9% Dogecoin – down 2.1% Binance Coin – down 1.6% Terra – down 1.5% Cardano – down 0.7% XRP – down by 0.4%

The recent cryptocurrency rout has hit wallets hard, with US markets also joining in the frenzy as stocks emerge from their worst week since the pandemic began.

Bitcoin drops to six-month low

The price of bitcoin has been under severe pressure since the Federal Reserve meeting in early November, when the central bank announced that it would start reducing its bond purchases, reducing the stimulus to the financial system.

This downward trend continued through much of December and into January. After peaking above $51,000 in late December, the digital currency fell to around $41,000 in early January and spent the last two weeks in the low $40,000 range around $42,000. This latest drop saw the cryptocurrency trade below the $40,000 level for the first time since August. After the most recent dip, Bitcoin is trading near six-month lows.

On Thursday, the Federal Reserve released its 40-page paper exploring the creation of a “digital dollar,” essentially a central bank-backed cryptocurrency version of the U.S. dollar. Although the Fed has not yet taken a position on creating a currency, the paper explores the pros and cons of doing so. Now the Fed is seeking public comment on the matter.

Fed cuts stimulus as inflation ripples through economy

At its December meeting, the Fed announced it was increasing the pace of its cut, buying even fewer bonds than it had planned in November. The new pace means the Fed will stop buying bonds by March 2022.

From there, the Fed said it would eventually raise interest rates, if conditions warranted it.

“With inflation having been above 2% for some time, the committee expects it to be appropriate to maintain this target range until labor market conditions have reached levels consistent with the assessments of the maximum employment committee,” the Federal Open Market Committee said in a prepared statement. .

Now, market analysts expect the Fed to raise interest rates at its next meeting in March. According to CME’s FedWatch tool, the market is pricing in an 87% chance of the Fed raising rates by 25 basis points, with a 3% chance of a 50 basis point hike.

While Bitcoin’s price peaked at $68,990.90 in early November, the value of the cryptocurrency has steadily weakened since then. Nevertheless, Bitcoin remains at the top of the list of the most valuable cryptocurrencies by total market capitalization.

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Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Further, investors are cautioned that past performance of investment products does not guarantee future price appreciation.

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