Bitcoin Sinks Below $27K as Federal Reserve, Powell Keep Focus on Inflation

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The central bank confirmed most expectations with its decision to raise the interest rate by 25 basis points. Other major cryptos were largely in the red.

By Jocelyn Yang

Mar 22, 2023 at 8:12 p.m. UTC

Updated Mar 22, 2023 at 8:55 p.m. UTC

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(Javier Ghersi/Getty Images)

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Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

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Jocelyn Yang

Jocelyn Yang is a markets reporter at CoinDesk. She is a recent graduate of Emerson College's journalism program.

Follow @ _jocelynyang_ on Twitter

Alex Thorn

Head of Firmwide Research

Galaxy

Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

Secure Your Seat

Alex Thorn

Head of Firmwide Research

Galaxy

Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023.

Secure Your Seat

Bitcoin (BTC) sank below $27,000 as the U.S. Federal Open Market Committee (FOMC) did as was widely expected Wednesday, raising interest rates again, this time by a quarter point .

The decision reinforces the Federal Reserve's concerns that inflation remains problematic. The FOMC is "strongly committed to returning inflation to our 2% objective," Fed Chair Jerome Powell said following the rate increase announcement.

Yet, in a statement accompanying the announcement Wednesday afternoon, the FOMC also acknowledged this month's banking near-meltdown, saying that "recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation."

BTC, the largest cryptocurrency by market value, was recently trading at about $27,030, down 4.1% over the past 24 hours, with the BTC/U.S. dollar trading pair plunging as low as $26,815 at one point on the Coinbase exchange. Earlier Wednesday, BTC's price rose as high as $28,815, reaching its highest level since June 10 because some investors hoped the Fed would end its year-long diet of hawkish interest rate increases because of the recent bank failures. But the Fed dashed those hopes.

Still, a number of analysts were optimistic about bitcoin's price in the near future, given the bank sector's calamities. "Bitcoin, straddling between being the leading risk-on asset and a financial lifeboat in the event of an all-out banking crisis, has benefited from the recent turmoil and now the prospect that the Fed’s tightening could be over," James Lavish, managing partner at Bitcoin Opportunity Fund, told CoinDesk in an email.

However, Lavish said he would still expect volatility ahead as the recent banking crisis continues. "We march toward a recession, or worse, a much larger credit event occurs," he predicted.

Samir Kerbage, chief investment officer at crypto asset manager Hashdex, told CoinDesk via email that “while this rate hike is a negative for risk assets in general, it is positive for bitcoin and gold as this puts more stress on the banking sector."

Vineeth Bhuvanagiri, the managing director of Emurgo Fintech, the founding entity of the Cardano blockchain, said in an email to CoinDesk in an email that “banks are really struggling," adding, "Authorities are having to return to massive liquidity injections to shore up the financial sector. And bank runs are forcing investors to rethink what it is to actually own assets – that is, they’re realizing that deposits in banks can feature major counterparty risk."

Ether (ETH), the second-largest cryptocurrency by market value, was recently hovering around the $1,740 level, down 3.1% from Tuesday, same time. Among other major digital currencies, crypto payment platform Ripple’s XRP token was recently down 11%, a reversal from earlier in the day when XRP jumped 20% on reports Ripple was well-placed to win a landmark case against the U.S. Securities and Exchange.

The CoinDesk Market Index , which measures overall crypto market performance, was recently up 4%.

Traditional markets fell, albeit not by much following the Fed announcement. The S&P 500, Dow Jones Industrial Average (DJIA) and tech-heavy Nasdaq all closed down 1.6%.

The two-year Treasury bond rate, a gauge that usually reflects near-term interest rate expectations, fell to 3.93%.

The U.S. central bank’s decision comes after February consumer price index data showed month-over-month inflation dropping to 6% from the previous month's 6.4% reading. Core data, which strips away volatile energy and food costs, ticked down slightly. The declining CPI suggested that Fed measures were at least slowly taming inflation and offered support for monetary policy observers who have insisted in recent months that the Fed had overstepped.

Meanwhile, the labor market has remained strong, with a drop in the most recent weekly U.S. jobless aid claims .

“I think Powell's gonna be very sensitive about surprising the market,” Ben McMillan, chief investment officer of crypto asset manager IDX Digital Assets, told CoinDesk prior to the decision.

But McMillan maintained that he had seen a more bullish attitude toward risk assets.

"We've noticed that people are starting to think of bitcoin as the same bucket now as commodities or hard assets as stores of value,” he said.

In an email to CoinDesk, Brent Xu, chief executive officer and co-founder of Umee, a Web3 bond-market platform, wrote that bitcoin had "shown remarkable strength during this global crisis involving the banks."

"Something resembling a mini bull run could be in play, but I think there’s a need to be cautious here," he wrote. "The Federal Reserve might continue hiking rates higher than expected – that is, beyond this most recent 25 basis point hike – given that inflation has yet to be tamed. A pullback could be in store because of this, meaning that it’s just too uncertain a time right now for more definitive calls to be made."

James Rubin contributed to this report.

UPDATE (March 22, 2023, 20:28 UTC): Updates with latest XRP and CoinDesk Market Index figures.

BTC $ 27,386.61 2.62%

ETH $ 1,742.06 2.89%

BNB $ 321.38 3.50%

XRP $ 0.42145166 8.78%

APT $ 12.86 7.36%

View All Prices

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Jocelyn Yang

Jocelyn Yang is a markets reporter at CoinDesk. She is a recent graduate of Emerson College's journalism program.

Follow @ _jocelynyang_ on Twitter

Learn more about Consensus 2023 , CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.

Jocelyn Yang

Jocelyn Yang is a markets reporter at CoinDesk. She is a recent graduate of Emerson College's journalism program.

Follow @ _jocelynyang_ on Twitter

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Markets. The central bank confirmed most expectations with its decision to raise the interest rate by 25 basis points. Other major cryptos were largely in the red. By Jocelyn Yang. Mar 22, 2023 at 8:12 p.m. UTC. Updated Mar 22, 2023 at 8:55 p.m. UTC. Facebook icon. Linkedin icon. Twitter icon. (Javier Ghersi/Getty Images) Alex Thorn. Head of Firmwide Research. Galaxy. Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023. Secure Your Seat. Alex Thorn. Head of Firmwide Research. Galaxy. Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023. Secure Your Seat. Facebook icon. Linkedin icon. Twitter icon. Jocelyn Yang. Jocelyn Yang is a markets reporter at CoinDesk. She is a recent graduate of Emerson College's journalism program. Follow @ _jocelynyang_ on Twitter. Alex Thorn. Head of Firmwide Research. Galaxy. Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023. Secure Your Seat. Alex Thorn. Head of Firmwide Research. Galaxy. Hear Alex Thorn share his take on "Bitcoin and Inflation: It’s Complicated” at Consensus 2023. Secure Your Seat. Bitcoin (BTC) sank below $27,000 as the U.S. Federal Open Market Committee (FOMC) did as was widely expected Wednesday, raising interest rates again, this time by a quarter point . The decision reinforces the Federal Reserve's concerns that inflation remains problematic. The FOMC is "strongly committed to returning inflation to our 2% objective," Fed Chair Jerome Powell said following the rate increase announcement. Yet, in a statement accompanying the announcement Wednesday afternoon, the FOMC also acknowledged this month's banking near-meltdown, saying that "recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation." BTC, the largest cryptocurrency by market value, was recently trading at about $27,030, down 4.1% over the past 24 hours, with the BTC/U.S. dollar trading pair plunging as low as $26,815 at one point on the Coinbase exchange. Earlier Wednesday, BTC's price rose as high as $28,815, reaching its highest level since June 10 because some investors hoped the Fed would end its year-long diet of hawkish interest rate increases because of the recent bank failures. But the Fed dashed those hopes. Still, a number of analysts were optimistic about bitcoin's price in the near future, given the bank sector's calamities. "Bitcoin, straddling between being the leading risk-on asset and a financial lifeboat in the event of an all-out banking crisis, has benefited from the recent turmoil and now the prospect that the Fed’s tightening could be over," James Lavish, managing partner at Bitcoin Opportunity Fund, told CoinDesk in an email. However, Lavish said he would still expect volatility ahead as the recent banking crisis continues. "We march toward a recession, or worse, a much larger credit event occurs," he predicted. Samir Kerbage, chief investment officer at crypto asset manager Hashdex, told CoinDesk via email that “while this rate hike is a negative for risk assets in general, it is positive for bitcoin and gold as this puts more stress on the banking sector." Vineeth Bhuvanagiri, the managing director of Emurgo Fintech, the founding entity of the Cardano blockchain, said in an email to CoinDesk in an email that “banks are really struggling," adding, "Authorities are having to return to massive liquidity injections to shore up the financial sector. And bank runs are forcing investors to rethink what it is to actually own assets – that is, they’re realizing that deposits in banks can feature major counterparty risk." Ether (ETH), the second-largest cryptocurrency by market value, was recently hovering around the $1,740 level, down 3.1% from Tuesday, same time. Among other major digital currencies, crypto payment platform Ripple’s XRP token was recently down 11%, a reversal from earlier in the day when XRP jumped 20% on reports Ripple was well-placed to win a landmark case against the U.S. Securities and Exchange. The CoinDesk Market Index , which measures overall crypto market performance, was recently up 4%. Traditional markets fell, albeit not by much following the Fed announcement. The S&P 500, Dow Jones Industrial Average (DJIA) and tech-heavy Nasdaq all closed down 1.6%. The two-year Treasury bond rate, a gauge that usually reflects near-term interest rate expectations, fell to 3.93%. The U.S. central bank’s decision comes after February consumer price index data showed month-over-month inflation dropping to 6% from the previous month's 6.4% reading. Core data, which strips away volatile energy and food costs, ticked down slightly. The declining CPI suggested that Fed measures were at least slowly taming inflation and offered support for monetary policy observers who have insisted in recent months that the Fed had overstepped. Meanwhile, the labor market has remained strong, with a drop in the most recent weekly U.S. jobless aid claims . “I think Powell's gonna be very sensitive about surprising the market,” Ben McMillan, chief investment officer of crypto asset manager IDX Digital Assets, told CoinDesk prior to the decision. But McMillan maintained that he had seen a more bullish attitude toward risk assets. "We've noticed that people are starting to think of bitcoin as the same bucket now as commodities or hard assets as stores of value,” he said. In an email to CoinDesk, Brent Xu, chief executive officer and co-founder of Umee, a Web3 bond-market platform, wrote that bitcoin had "shown remarkable strength during this global crisis involving the banks." "Something resembling a mini bull run could be in play, but I think there’s a need to be cautious here," he wrote. "The Federal Reserve might continue hiking rates higher than expected – that is, beyond this most recent 25 basis point hike – given that inflation has yet to be tamed. A pullback could be in store because of this, meaning that it’s just too uncertain a time right now for more definitive calls to be made." James Rubin contributed to this report. UPDATE (March 22, 2023, 20:28 UTC): Updates with latest XRP and CoinDesk Market Index figures. BTC $ 27,386.61 2.62% ETH $ 1,742.06 2.89% BNB $ 321.38 3.50% XRP $ 0.42145166 8.78% APT $ 12.86 7.36% View All Prices. Sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context. Sign Up. By signing up, you will receive emails about CoinDesk product updates, events and marketing and you agree to our terms of services and privacy policy . DISCLOSURE. Please note that our privacy policy , terms of use , cookies , and do not sell my personal information has been updated . The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies . CoinDesk is an independent operating subsidiary of Digital Currency Group , which invests in cryptocurrencies and blockchain startups . As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights , which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG . Jocelyn Yang. Jocelyn Yang is a markets reporter at CoinDesk. She is a recent graduate of Emerson College's journalism program. Follow @ _jocelynyang_ on Twitter. Learn more about Consensus 2023 , CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now. Jocelyn Yang. Jocelyn Yang is a markets reporter at CoinDesk. She is a recent graduate of Emerson College's journalism program. Follow @ _jocelynyang_ on Twitter. Read more about. Bitcoin. Fed. Interest rate. Markets. Trading. Investing.