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Bitcoin Falls 5% as Fed Confirms Interest Rate Hikes

Bitcoin Falls 5% as Fed Confirms Interest Rate Hikes
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  • BTC is down about 5% today, while ETH and the rest of the cryptocurrency market has seen losses up 6%.
  • Those losses coincide with similar but more moderate losses in the stock market, with the Nasdaq down 3.3% today.
  • The market drop is likely related to inflationary concerns about the US Federal Reserve’s plans to raise interest rates.

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Bitcoin prices are down about 5% today along with the news that the US Federal Reserve will raise interest rates in the coming months.

Bitcoin and Ethereum down

Bitcoin (BTC) price has fallen by 5.3% in the past 24 hours, as the asset’s value fell from $45,800 to $43,500. This amount is the lowest price the cryptocurrency has seen since September 2021.

Bitcoin prices for january. 5. Source: CoinGecko

Meanwhile, the value of Ethereum (ETH) decreased by 6.7% over the same period, dropping from $3,780 to $3,545.

Leading cryptocurrencies and cryptocurrencies such as Binance Coin (BNB), Cardano (ADA), Ripple (XRP), Avalanche (AVAX), Dogecoin (DOGE), and Shiba Inu (SHIB) saw similar losses from 5.7% to 6.9%.

Polkadot (DOT), Terra (LUNA), and Solana (SOL) were somewhat stronger, with losses of 7.3%, 7.9% and 8.4%, respectively.

The losses extended to the rest of the cryptocurrency market, which is down 5.9% today, resulting in a total market capitalization of $2.2 trillion.

Fed rate hike could be effective

The reasons for the market stagnation are uncertain, as there have been few, if any, significant announcements in the cryptocurrency industry today.

However, Bitcoin and the stock market are known to correlate often, with a 100-day correlation of 0.33 reported late last year. As such, losses today may be related to similar but more moderate losses in the stock market. The Nasdaq Composite has lost 3.3% over the past 24 hours, while the S&P 500 has seen losses of 1.9% in the same period.

Those stock market losses have been attributed to the US Federal Reserve’s assertion that it will start raising interest rates in the coming months, raising concerns about inflation.

It is believed that a rate hike could happen sooner than expected and in March. Such a short time frame may be driving a massive sell-off among investors today.

Disclosure: At the time of writing, the author of this article owns BTC, ETH, and other cryptocurrencies.

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