Major cryptocurrencies’ losses deepen after hawkish Fed comments

Prices of Bitcoin and other cryptocurrencies are continuing their slide over the last two days, along with the stock market, as market analysts expect that the US Federal Reserve will raise interest rates soon to fight inflation. Bitcoin has slumped over 17% since December 27.

Bitcoin continues its slide Thursday after hawkish commentary from the Federal Reserve and technology stocks continue to drop.

The biggest digital currency recently traded at $41,630 on January 7 has dropped over 17% since December 27, according to Yahoo Finance.

It’s not just Bitcoin that fell. The global crypto market also fell from around $2.23 trillion to just over $2 trillion between Wednesday morning and Wednesday night. Other popular tokens, like Ethereum and Cardano, were all down by several percentage points over the past 24 hours on Thursday morning.

In the world of stock markets, Wall Street closed on Wednesday with the Dow Jones Industrial Average stock index down more than 1% while the S&P 500 fell even lower, down nearly 2%.

As for tech stocks, the Nasdaq Composite index, which has a heavy tech concentration, recently stood at 15,705, down 0.39%. It dropped 5% combined Tuesday and Wednesday. Unfortunately, it looks like Bitcoin isn’t withstanding that decline.

Bitcoin advocates contend that it can serve as a hedge against rising inflation and falling stocks, but that’s not happening. Consumer prices soared 6.8% in the 12 months through November, the highest in 39 years.

According to CNBC, Wednesday’s minutes from the Fed’s policy meeting last month said rampant inflation and a red-hot job market could necessitate rate hikes “sooner or at a faster pace than participants had earlier anticipated.”

That led many economists and investors to forecast a rate increase in March, after the Fed’s planned completion of its bond-buying tapering. The CME FedWatch tool indicates federal funds traders see a 71% chance the Fed will move in March.

Clearly, this move is not reassuring for Bitcoin holders. To be sure, Bitcoin proponents could argue that the cryptocurrency is falling because investors believe the Fed will get inflation under control with its tightening. So there would be less need to hold Bitcoin as an inflation hedge.