Bitcoin price took a slight hit after the Federal Reserve announced plans to increase interest rates twice in 2023
Bitcoin price has dropped nearly 5% to the $38,000 region yet many traders still believe that the world’s largest cryptocurrency will recover quickly. In the same situation as BTC is gold, the spot gold price stands at $1,819.75/ounce, down around $38 over the past 24 hours.
BTC/USD 4-hour chart | Source: TradingView
The Federal Reserve believes the current bump in inflation is temporary
Elsewhere, the USD exchange rate rose to a peak of nearly 6 weeks after the US Federal Reserve (Fed) released a tentative plan for the first interest rate hike after the coronavirus pandemic.
Recent US economic data shows that inflationary pressure in this country is increasing. In fact, inflation is at its highest level since 2008.
While Federal Reserve Chairman Jerome Powell believes it will subside, he admitted it could linger at current levels or even go higher:
“As the reopening continues, shifts in demand can be large and rapid. And bottlenecks, hiring difficulties and other constraints, could continue to limit how quickly supply can adjust, raising the possibility that inflation could turn out to be higher and more persistent than we expect.”
Later, Powell said that the Fed raised inflation expectations from 2.4% to 3.4%. Consumer prices are at a 13-year high. It was 5% higher in May 2021 than they were in May 2020. Therefore, the central bank may have to boost interest rates to cool off inflation. Thirteen of 18 officials now expect to raise short-term interest rates before the end of 2023.
Bitcoin price fell amid the USD rate rebounding after the Fed statement
Some analysts believe that rising inflation will have a negative impact on gold prices. Because, when inflation increases, the Fed must tighten monetary policy, reduce the supply of $ 120 billion per month to buy valuable papers to support businesses to overcome the epidemic, and increase the basic interest rate to control inflation.
Maybe that’s why the market is worried about USD appreciation shortly. Bitcoin price and the gold price will fall into adverse circumstances. Since then, many investors think holding these types of assets can be risky.
In the last 24 hours, Bitcoin’s lowest trading volume was at $38,131 and the highest was at $40,506. Data from Coinmarketcap shows that the amount of Bitcoin traded at about $ 39.2 billion, the market capitalization recorded at $ 717.3 billion.
In another development, Glassnode stated:
“The seven-day average hashrate slid to 129.1 million exahashes per second on Tuesday, well off the all-time high of 180.6 million exahashes per second in mid-May.”
However, it’s still up from 105.6 million a year ago. Some analysts predict that the drop in the Bitcoin hashrate will be reversed eventually as some miners leave China for other locales.
The estimated number of terahashes per second the bitcoin network is performing in the last 30 days | Source: Blockchain
Stock markets also took a slight hit. Reportedly, the Dow and S&P 500 also pulled back 0.77% and 0.54% respectively. Meanwhile, the Nasdaq 100 was also down $0.34, Nasdaq was down 0.24% and the NYSE Composite recorded a drop of $0.68.
U.S. stocks fell after the Fed’s initial statement and economic projections
The market is reacting violently to the Fed’s upgrade to the inflation forecast and bringing those two interest rate increases forward. The big question is this transitory or is it more permanent.
At the present time, the overall cryptocurrency market is also decreasing according to BTC, but the decrease is not significant. In another development, Facebook’s Diem has announced it is offering a pre-sale discount on its token for early investors.
“You can participate in the birth of Diem and be one of the first buyers. Buy Diem Coins now with cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash.”
While the crypto community gives little love to Diem, the thing to know is that Facebook users aren’t necessarily crypto enthusiasts, to begin with. As much as Facebook is the platform we love to hate, Diem really could be what brings crypto to the masses.
In short, if BTC drops below the $37,000 – $36,000 range, quite a few say the price is likely to go to the lower end of its current range in the $35,000 to $31,000 zone.
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