Fed uncertainty brings BTC and ETH market down by 6%
Bitcoin and Ethereum are down 6% as investors remain concerned about the Fed tapering policy and Fed market drops.
Due to the COVID-19 omicron variant, new comments from Fed Chairman Jerome Powell suggest that officials may defer tapering their bond-buying program.
The fed market’s problems from last week have yet to be resolved. According to CoinGecko, Bitcoin and Ethereum were down about 6% from the previous day as of Monday afternoon.
Last week ended with news that Chinese real estate developers Evergrande and Kaisa had failed to make US dollar bond payments, causing stock and cryptocurrency market to fall. According to analyst and trader Alex Kruger, we may also be seeing the impact of “performance fees, bonuses, audits, wash sales, [and] tax loss harvesting” on Friday.
The pressing question now is whether the Fed market Reserve will change its plans to slow down its bond-buying program, ending it in March rather than June. On Monday, the impact was visible in both crypto and traditional markets.
Since Friday, the price of Bitcoin has fallen. It has been trading at just over $47,000, down 31% from its all-time high of $69,044.77 set on Nov. 10, 2021. And Ethereum, which was trading at slightly more than $4,000 at the end of last week, fell over the weekend. According to CoinGecko, it was trading at around $3,800 on Monday.
Other coins in the top ten appeared to be doing worse. Solana’s native SOL was down 9 percent from the previous day, while Cardano’s ADA was down 7.5 percent. Meanwhile, the global crypto market cap was $2.26 trillion, a 5% drop from the previous day.
Even exchange-traded products linked to crypto market, such as the Grayscale Bitcoin Trust (GBTC) and the ARK Innovation ETF (ARKK), fell 4% and 3%, respectively, on Monday.
Traditional markets fared little better. According to Yahoo Finance, the New York Stock Exchange Composite has dropped 124 points, or 0.75 percent, since it opened on Monday morning.
Until the end of last week, economists expected the Fed to accelerate its taper, implying an early end to the treasury and mortgage-backed bond buying programs it’s been using to prop up the economy market still suffering from the effects of the COVID-19 virus.
“At the December FOMC meeting, we expect the Fed market to announce a doubling in the tapering deal,” Deutsche Bank economists said last week, “raising the monthly outflow to $20 billion and $10 billion for Treasuries and MBS, respectively.”
If that were the case, the sales would have ended in March rather than June. However, there are indicators that Fed market officials are paying greater attention to the omicron strain of the COVID-19 virus than they were to the delta variant.
“More fear of the virus could diminish people’s willingness to work in person, slowing the labor market and exacerbating supply-chain disruptions,” said Fed market Chairman Jermoe Powell in remarks prepared for a Senate Banking Committee hearing on Tuesday.
It’s unclear whether this “heightened worry” will persuade Fed officials to keep the bond-buying programs on track. For the time being, it appears that investors are eager to unload riskier assets until the Fed’s monetary policy is clarified.
Disclaimer: this article is for informational purposes only and does not represent financial, investment or other advice.