Bitcoin: Cryptocurrencies collapse before the Fed, bitcoin loses more than 50% since its record

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(BFM Bourse) – Stimulated since the start of the health crisis by the flowing money from central banks, cryptocurrencies are bearing the full brunt of the prospect of an upcoming normalization of the Fed’s monetary policy. Bitcoin is now down more than 50% since its all-time high last November.

Although equity markets are starting the year off on the wrong foot in the face of fears of faster-than-expected monetary tightening by the Fed, their decline remains very moderate compared to the ongoing correction in the cryptocurrency market. The Nasdaq is admittedly in correction territory (-12.9% from its peak in late November to Friday’s close) for the first time since March 2020, but the S&P (-8.3%) is not there yet. , and the CAC 40 even less.

On the other hand, in the cryptocurrency market, the decline is of a completely different magnitude. After dropping nearly 10% on Friday, the price of bitcoin still swayed significantly over the weekend, notably yielding more than an additional 4% on Saturday to fall to its lowest point since last summer. Over the past week, bitcoin has dropped more than 11% while ethereum, the second cryptocurrency in terms of valuation, has fallen by 17%.

And the crash continues this Monday morning for the two benchmarks in the cryptocurrency market. Shortly after 11:15 a.m., bitcoin fell again by 7.2% to 33,670 dollars when ethereum faltered by 10.8% to 2,270 dollars, the lowest since the end of last July.

wind of panic

The fall is therefore now taking on spectacular proportions, since bitcoin has dropped 51% since its historic peak reached in early November at nearly 69,000 dollars per unit. Ethereum tumbles in the same proportions (-53%).

In the wake of the two market benchmarks, the price of all the main cryptocurrencies is collapsing – BNB (the token developed by Binance), Cardano and Solana are falling by 29%, 36% and 42% respectively over the last 7 days .

Concern continues to engulf investors and is clearly turning to panic on the eve of the new meeting of the Fed’s monetary policy committee, when rumors are rife about a possible tighter monetary tightening than initially expected. In an attempt to stem historically high inflation, the central bank could opt for a more aggressive strategy with a first rate hike as early as March, some investors fear. After two years of uncontrolled expansion of its balance sheet which fueled the market rebound and the cryptocurrency surge, the prospect of a future reduction in the latter is generating a sharp resurgence of risk aversion among operators.

Quentin Soubranne – ©2022 BFM Bourse

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