Bitcoin Loops and Rebounds as Fed Signals More Aggressive Rate Hikes Ahead

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The price of Bitcoin fell after the release of minutes from the Federal Reserve’s December meeting, which showed that central banks planned to continue raising interest rates.

The largest cryptocurrency fell nearly 1%, trading for $16,790, within an hour of the Fed’s announcement, according to CoinGecko. It has since made modest gains, and the asset is still up 1.2% in the past 24 hours and 0.5% in the past week.

Ethereum, the second-largest digital asset by market capitalization, fell 1% in one hour. Ethereum tends to follow the movements of Bitcoins following Fed announcements.

The entire crypto market has been closely tied to US stocks since last year. When the Federal Reserve raised interest rates to keep inflation under control, investors typically sold US stocks, along with bitcoins and other digital assets in an effort to shift risk.

This year might be no different: stocks and almost all crypto tokens and coins fell on news that the Fed would not back down from its aggressive monetary policy.

With inflation still well above the Committee’s long-term 2% target, participants agreed that inflation was unacceptable, according to the minutes, adding that an unwarranted easing of financial conditions would complicate the efforts of the Committee to restore price stability.

The minutes also noted the collapse of digital asset exchange FTX, but said it had no serious effect on the wider financial system.

While the fallout from this situation was significant among other crypto lenders and exchanges, the collapse was not considered to pose broader market risks to the financial system, according to the minutes.

FTX went bankrupt in November, which seriously hurt the crypto market and its investors. The monumental downfall of the company and former CEO Sam Bankman-Frieds has led to a criminal investigation and fresh calls from politicians and regulators to rein in the industry.

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