Cryptocurrency markets were sluggish Friday after Federal Reserve Chairman Jerome Powell stated that interest rate hikes should be made “more quickly.”
Powell also indicated that a rate hike of 0.5 percentage point was “on the table” for next month.
James Bullard of St. Louis Federal Reserve Bank stated Tuesday that interest rates could reach 3.5 percent before the end of this year.
Bitcoin dropped to $40,586 Friday. This is down from its daily peak of $42,965 at noon. The entire cryptocurrency market fell to $1.88 trillion.
Tuesday morning, Bitcoin’s price fell below the $40,000 mark before regaining a few hours later. Bitcoin was just slightly above $42,000 Thursday.
Bitcoin is a game changer
Market observers believe that the $40,000 barrier is a crucial point in Bitcoin’s history. Its performance could determine whether it enters a bullish or bearish phase.
Inflation is on the rise, stocks are collapsing and investors not knowing how quickly the central banks will increase interest rates, so many argue this is the perfect time to invest Bitcoin.
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Nonetheless, the world’s most valuable digital asset has shed almost 20% of its value thus far this year, dipping as low as $33,000 on January 25 before recovering. Bitcoin reached an unprecedented high of approximately $69,000 last November, which was just three months ago.
BTC market capital at $775.76 Billion according to the daily chart. Source: TradingView.com| Source: TradingView.com
Bitcoin’s trading history has been turbulent and volatile from its inception. As an asset class, cryptocurrency is evolving in tandem with the factors that affect its price.
Cryptocurrencies have continued to track the tech industry’s recent decline, as the Nasdaq fell 2% Friday, the most since middle of March.
Rate hike to contain inflation
In order to combat rising inflation which was 8.5 percent last month, the interest rates are increasing. The discounted cash flow method is used to appraise high-growth investments such as technology.
Investors face rising inflation, geopolitical questions, and worries about central banks tightening their monetary policy.
The Fed’s March meeting minutes released last week revealed its intention to cut its balance sheet by $95 billion each month to contain inflation.
Meanwhile, In another development, Elon Musk’s electric vehicle company Tesla is hoding Bitcoin.
On the company’s balance sheet, digital assets total $1.261 billion. The Austin, Texas-based electric vehicle giant hasn’t sold or bought any crypto assets since the beginning of the year.
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Featured image by Investors King chart on TradingView.com