By: Ken Chase.
The price of Bitcoin remains well below its record November 2021 high of nearly $69,000, as regulatory and interest rate concerns continues to give investors pause. In fact, the last thirty days of trading activity have seen the price of the world’s most well-known cryptocurrency remain remarkably stable. Analysts have suggested that many investors are concerned about the multiple interest rate hikes the Federal Reserve is expected to announce throughout 2022.
On March 9, 2022, Bitcoin’s price stood at $41,929, according to data published on Investing.com. As of April 9, 2022, the price was $42,531. Even after the Fed announced its first interest rate increase since 2018, the cryptocurrency’s price has fluctuated between roughly $38,000 and $47,000 on a daily basis.
Experts remain wary, however, since the Federal Reserve’s current plans could involve as many as seven total interest rate hikes this year, and an additional three in 2023. In addition, the Fed has signaled that it is preparing to reduce its Treasury securities holdings, which Federal Reserve Chairman Jerome Powell has said could effectively serve as an additional rate hike.
For Bitcoin investors, the Fed’s new aggressive plan to combat rising inflation could have serious downside. In recent years, there has been an increase in institutional investment in the cryptocurrency markets. Since interest rate hikes are designed to tighten monetary policy and cool economic activity, some analysts are concerned that any Fed pressure on institutional financial markets could motivate those institutional investors to sell crypto assets, putting further downward pressure on price.
For now, investors appear to be cautiously waiting to see what the central bank will do in the coming months. According to Bianco Research president James A. Bianco, much will depend upon whether the Fed’s projected interest rate hikes send those rates to the anticipated 2.75%, and just how much pressure officials need to apply to the markets to slow the pace of inflation:
“If this forecast comes to pass, they’re going to lean on the markets; they’re going to want people to lose money. Will that hurt crypto markets and risk markets like stocks? Yes, and that’s part of the plan. They don’t want it to crash, they just want it to slow down.”