By Samuel Indyk
Investing.com – The price of Bitcoin dropped to its lowest level since the “flash crash” on 4th December last year following the release of the minutes from the Federal Reserve’s last meeting.
The minutes have paved the way for more aggressive tightening from the Fed as the Committee attempts to put a cap on soaring inflation.
“It may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” the minutes from the 14-15 December meeting showed.
The minutes also showed a discussion about the Fed’s balance sheet which included support for a reduction in its size after the Fed begins hiking interest rates. Some of the participants said a move to shrink the balance sheet could occur “relatively soon” after the first rate hike.
Based on current expectations, the Fed is expected to begin raising the fed funds rate in March, suggesting that a reduction in the balance sheet could begin as soon as spring.
Hawkish minutes – Bitcoin lower
Bitcoin was not immune to the selling pressure as the world’s largest cryptocurrency by market cap dropped to its lowest level since the “flash crash” on 4th December where it touched $42,580.
Bitcoin had previously found support in the $45,500-$45,800 zone but dropped below there following the Fed’s announcement.
A drop below the 4th December low would take Bitcoin to its lowest level since 30th September, but so far the level has acted as support.
If that support level was to break, a drop to the psychological $40,000 level could occur.
On the upside, the 200-day moving average near $48,000 and psychological $50,000 could act as resistance.
Another point for cryptocurrency traders to keep an eye on is the ongoing protests in Kazakhstan.
When China shut down mining operations in the middle of last year, it was thought many crypto miners moved over the border to Kazakhstan. Yesterday, political unrest over sky-high fuel prices turned into deadly rioting as protesters attempted to seize government buildings.
It prompted the state-owned telecoms company Kazakhtelecom to shut down nationwide access to the internet.
According to The Block’s Larry Cermak, roughly 18% of the Bitcoin hashrate (the computer power used for transactions) is based in Kazakhstan. Cermak reported that the impact on the total hashrate from the internet outage was an approximate 12% drop.
Whether this will have an impact on the price of Bitcoin in the short term is unclear but the protests should definitely be on the radar of those with an interest in Bitcoin and other cryptocurrencies.
Other major cryptocurrencies showed similar price action to Bitcoin with all the top 10 largest by market cap down by between 9% and 13% over the last 24 hours.
Of the top 100 coins by size, Safemoon (+4%) was the only one trading in positive territory.
Bitcoin tumbles as Fed minutes reveal inflation fears, faster tightening
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