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Bitcoin Nears Lowest Level Since 2020 as Fed Looms

The largest cryptocurrency, Bitcoin, was little changed at $19,000 as of 11:44 a.m. in Singapore on Wednesday. Other major coins like Ether, Solana and Avalanche were also steady. A drop of more than 7% in Bitcoin would send it back to 2020 prices.

September 21, 2022
3 minutes
minute read

Cryptocurrency investors are eagerly awaiting a Federal Reserve policy decision that could determine whether Bitcoin can avoid a decline to levels last seen during the global pandemic.

The largest cryptocurrency, Bitcoin, was little changed at $19,000 as of 11:44 a.m. in Singapore on Wednesday. Other major coins like Ether, Solana and Avalanche were also steady. A drop of more than 7% in Bitcoin would send it back to 2020 prices.

If the Fed raises borrowing costs by three-quarters of a percentage point as expected, markets may experience a temporary respite. However, a bigger increase of one percent to fight inflation could put pressure on riskier assets by jeopardizing liquidity.

John Toro, head of trading at digital-asset exchange Independent Reserve, said that if the FOMC delivers less than a 100 basis points hike, it would make sense to see a small relief rally. He added that this could be quite large if the FOMC were to deliver less than a 75 basis points increase, although this seems highly unlikely.

This week, the MVIS CryptoCompare Digital Assets 100 Index is down, with losses for the year so far totaling around 60%. This is in contrast to global stock markets, which are down 21% for the year. The correlation between equities and Bitcoin is elevated and close to a record, indicating that assets are being influenced by common macroeconomic factors.

"If the Fed does end up increasing rates by 100 basis points, we could see quite a bit of volatility in the cryptocurrency markets," said Laura Vidiella del Blanco, vice president of business development and strategy at LedgerPrime, in an interview with Bloomberg Television.

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