• The Federal Reserve announced that interest rates could rise in March, triggering broad sell-off in crypto. 
  • Bitcoin price experienced sharp swings in response to Fed's decision; experts believe the asset could reverse its 2021 gains.
  • The central bank's persistence on an interest rate hike has put fear among investors.
  • Analysts believe Bitcoin could reverse its gains to the extent that traders holding stablecoins would be better off. 

The Federal Reserve's latest announcement has promoted fear among investors. Bitcoin and Ethereum wiped recent gains as the overall cryptocurrency market suffered a bloodbath. 

Bitcoin price wiped recent gains with Fed's latest announcement

Historically, Bitcoin has acted as a hedge against inflation; however, the asset has traded like a stock in response to the Federal Reserve's monetary policy changes. 

When the central bank increases interest rates, Bitcoin price generally gives up its gains. Though the Federal Reserve left interest rates unchanged at the last meeting, the central bank did reveal plans to introduce a hike in March. 

After the two-day meeting, the Fed issued a statement that reads:

With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.

The prospect of the central bank tightening monetary policy induced fear among investors, triggering a bloodbath in crypto markets. 

Mike Novogratz, CEO at Galaxy Investment Partners, was quoted as saying:

A lot of the beatdown has happened. It's going to be a tough year for assets. ... We're going through a paradigm shift.

Experts have argued that a hike in interest rates could lead to a complete reversal of Bitcoin and Ethereum gains from 2021, to the extent that traders holding stablecoins in their portfolios would be better off. 

High interest rates drive capital away from speculative and volatile markets and into government bonds. Analysts have argued that the shift in capital may have already been priced in. 

@inmortalcrypto, a pseudonymous cryptocurrency analyst, predicted that the asset could plummet further if Bitcoin price drops below $35,000. 

FXStreet analysts have evaluated the Bitcoin price trend and noted a reversal candle. Analysts believe that Bitcoin price could target $48,000. 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Here’s the list of crypto exchanges that will support Terra’s LUNA hard fork

Here’s the list of crypto exchanges that will support Terra’s LUNA hard fork

Cryptocurrency exchanges are on board Terra’s LUNA hard fork and Do Kwon’s plan for the Terraform Labs token’s rebirth. Do Kwon has garnered support from leading cryptocurrency exchanges for the new Terra chain. 

More Terra News

Breaking: Ethereum breaks below $1,900 as selling pressure accelerates

Breaking: Ethereum breaks below $1,900 as selling pressure accelerates

Ethereum dipped below the $1,900 support level over the past few hours. A decisive close below such a vital demand zone will put ETH at risk of a 38% correction toward $1,200. 

More Ethereum News

A big price move is coming for Binance Coin; here’s what to look out for

A big price move is coming for Binance Coin; here’s what to look out for

A brief technical and on-chain analysis on Binance Coin price. Here, FXStreet's analysts evaluate where BNB could be heading next. 

More Binance Coin News

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Cryptos Ready - set - RALLY!

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Cryptos Ready - set - RALLY!

Bitcoin price, Ethereum and other cryptocurrencies are stabilising after the cryptocurrency space got slaughtered last week and two weeks ago.

More Bitcoin News

Bitcoin: The last rebound before capitulation

Bitcoin: The last rebound before capitulation

Bitcoin is showing bullish signs in the lower time frames, which can be taken advantage of by traders in the next couple of days. But looking at BTC from the higher time frames suggests that the bottom is not in yet.

Read full analysis

BTC

ETH

XRP