Crypto prices have fallen in union with the stock market and tech
Cryptocurrency prices tumbled Wednesday following the release of hawkish minutes from the Federal Reserve’s March policy meeting.
Bitcoin fell 4.8% to $43,791 at last check, according to according to CoinGecko, while ethereum dropped down 6.8% to $3,228 and dogecoin sank 11.3% to $0.146770.
‘The Fed’s Gonna be Aggressive Here’
Crypto prices followed the stock market, which saw all three major indexes closing in the red.
The minutes indicated that the Fed will begin reducing its balance sheet by around $95 billion a month, nearly twice as fast as in 2017, while moving to “expeditiously” lift interest rates.
Edward Moya, senior market analyst for the Americas with Oanda, said “bitcoin is trading like a risky asset, trading lower alongside equities as Treasury yields surge.”
“Following the Fed’s minutes, Bitcoin extended declines after no dovish surprise emerged,” Moya said. “The Fed’s gonna be aggressive here and that is going to be short-term trouble for risky assets like bitcoin. Bitcoin could see weakness towards the $40,000 level, with the $38,000 level providing major support.”
The crypto price dropped sparked comments on social media.
“I’m long term bullish on crypto as hedge against fiat, but just pointing out that if fed minutes tank stocks crypto is going down with it,” one person said.
“Crypto space needs to stop worrying about the Fed minutes.,” another person tweeted. “You think Henry Ford cared about changes in horse breeding practices?”
‘Stop Analyzing Bitcoin’
“Stop analyzing bitcoin, it’s not about Bitcoin, it’s all about the stock market and FED minutes release,” another person commented. “Crypto is insignificant, it just follows NASDAQ ffs. In 6 days CPI data release and everything will have again a huge drop. Look wider!!!!”
Charlie Ripley, senior investment strategist with Allianz Investment Management, said the minutes “portray a higher level of urgency than previous communication as the Fed has circled on a commitment to run the balance sheet down faster than market participants may have expected. “
“The reality is we are in uncharted waters here and the Fed has a difficult task in unwinding the tremendous monetary support over the past couple years,” Ripley said. “Against this backdrop, it is highly conceivable that uncertainty in the path of monetary policy will remain embedded in markets and that is exactly what we have been witnessing with the recent moves in interest rates and risk assets.”
Commentary in the minutes appeared to indicate how voting members of the Fed’s Open Markets Committee have altered their views on inflation from their January meeting, when at least some had suggested inflation would return to target before the end of the year.
‘The Fed is Undoubtedly Tightening’
Since then, supply chains have been hit by another Covid surge in China and oil, food and energy prices have soared as a result of the impact of Russia’s war on Ukraine, adding to the “stickiness” of inflation prospects and cementing the case for at least seven more rate hikes between now and the end of the year.
“While the market has taken a bit of a breather anticipating an aggressive Fed posture, some fears may have been put to ease with the release of the minutes,” said Mike Loewengart, managing director of investment strategy with E*Trade from Morgan Stanley. “Half point basis point hikes are on the table, but that’s where the buck stops—it’s not guaranteed that half point increases are the new norm.”
Loewengart said most people predicted that a balance sheet plan would be rolled out, “so the market may have already priced that piece in.”
“The shocker here could be that the Russia/Ukraine conflict sidelined a .50% hike in March,” he added. “So as geopolitical tensions persist, some may question how that will factor into the Fed’s future decision making. Bottom line: the Fed is undoubtedly tightening, so we’ll likely continue to see investors shore up on defensive names.”
