Bitcoin Responds to Fed Announcement, Registers 10% Drop

Bitcoin Responds to Fed Announcement, Registers 10% Drop

The Federal Reserve, known only as the Fed, announced a 0.5% rate hike this Wednesday (4). Perhaps because it is a number that had already been predicted by investors, who feared an even bigger rise, Bitcoin actually had a slight rise.

However, the price plunged 10% this Thursday (5), following the trend of the stock market. As a high point, the S&P 500, an index that gathers the 500 largest companies in the US, is down 4% daily, comparable to other indices.

Once struggling to stay above $40,000, such a drop could have major significance for the rest of 2022. After all, this could be the real start of the so-called crypto winter.

Cryptocurrencies follow the fall of Bitcoin

Affected by Bitcoin, alternative cryptocurrencies also fell sharply this Thursday (5). In total, more than $125 billion (R$633 billion) disappeared from the market in a matter of hours.

The fall in question began during the morning, coinciding with the opening of US stock markets. Hence, this shows a correlation between the crypto and stock markets mainly caused by the latter’s entry into cryptocurrencies.

S&P 500 (SPX), 15 minutes. Source: TradingView
Bitcoin (BTC), 15 minutes. Source: TradingView

As such, the slowdown in Bitcoin’s response is clearly related to the stock market, which also experienced a slight rally before crashing. Therefore, the attack by governments on cryptocurrencies, which claim they are dangerous because of its volatility, is getting weaker and weaker, after all, it shocks all markets.

Cryptocurrency Winter

While Bitcoin is already a long way from its all-time high as measured in November, its distance from the $40,000 region is worrisome. In addition, this is the lowest Bitcoin price since February of this year.

As for alternative cryptocurrencies, they followed the same path as stocks and Bitcoin. The chart below of an FTX index consisting of 10 altcoins (ETH, EOS, BCH, BNB, LTC, XRP, TRX, DOT, LINK and ADA) shows this link well.

Altcoin Index Perpetual Futures (ALTPERP) from FTX, 15 minutes. Source: TradingView

While there is a risk of us entering a “crypto winter” with an ongoing bear market as governments try to contain inflation, now could be a good time to gather more satoshis with the DCA strategy.

Source: Live Coins

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