Cryptocurrencies fell in tandem with stocks Wednesday.
Advisor/Dreamstime
The price of Bitcoin was more than 7% down early Thursday as cryptocurrencies fell in the aftermath of the Federal Reserve’s December minutes.
The world’s largest cryptocurrency was trading just below $42,900 early Thursday, 7.6% down on its 24-hour high, according to CoinDesk—its lowest level since October, apart from a flash crash in December. It was trading above $46,000 shortly before the Federal Reserve’s December minutes were released. Ether, the No.2 cryptocurrency, was 12% lower than its previous day high at $3,339.
The Fed minutes raised the possibility of a rate increase as soon as March and revealed that officials have begun to discuss reducing the central bank’s $9 trillion balance sheet. Those revelations saw equities fall sharply, with the technology-heavy Nasdaq Composite slumping 3.3%.
The fact that cryptocurrencies fell in tandem with stocks is more evidence against Bitcoin as a haven asset or ‘digital gold’ as it has been called.
The Fed’s ever more hawkish tone may not be the only factor at play right now for Bitcoin.
The internet shutdown in Kazakhstan, following protests against energy price rises, may also be causing concern, according to Marcus Sotiriou, analyst at digital asset broker GlobalBlock.
“Kazakhstan is the second-largest country for Bitcoin mining, with 18% of Bitcoin’s hash rate (computing power), so the internet shutdown caused a 12% drop in Bitcoin’s hash rate within a few hours,” he said. “The hash rate is not directly correlated to the price of Bitcoin, but it gives an indication of the network’s security, so a fall can spook investors in the short term.”
Sotiriou added that there has been a “clear effort” in recent months to deploy additional computing power for the country’s Bitcoin mining operations “so the long-term impact of this power shortage may be negligible.”
Write to Callum Keown at [email protected]
