Bitcoin fell 8% to $38,000, wiping out much of its recent gains. Data suggesting growth in the U.S labor market spurred the current sell-off, bolstering the case for a Federal Reserve rate hike this month.
Traders were now eyeing $35,000 as the next level of support. A breach would send Bitcoin back to where it was two weeks ago, when rising worries of a Russian-Ukraine conflict prompted a risk-off attitude. While the token has since risen from a one-month low, reaching $44,000, gains have been halted due to a slowdown in trading by huge whale accounts.
In February, Bitcoin hit its previous high of $44,000. This year, the currency has lost 18% of its value.
Bitcoin’s losses accelerated after solid U.S. jobs statistics, despite the fact that it has been in a mild downturn for a few days. According to Yahoo Finance, employment increased at its fastest rate in seven months in February. The reading also corresponds to Fed Chair Jerome Powell’s recent remarks that the employment market is heating up and that the Fed would likely raise rates by at least 25 basis points in March.
An increase in interest rates will restrict market liquidity, limiting the amount of money that can be invested in Bitcoin.
The Fed bases its rate adjustments on two primary factors: inflation and employment. With consumer prices in the United States at a 40-year high, the Fed is expected to raise rates when it meets on March 15th and 16th. Powell’s hawkish remarks also debunked recent rumors that the Fed’s hike plans will be halted due to the Russia-Ukraine crisis.
Following the release of the data, broader financial markets wilted, as the potential of Fed hikes added to the uncertainty produced by the Russia-Ukraine crisis. Concerns of Russia seizing Europe’s largest nuclear plant in Ukraine also shook public opinion.
Despite nearly a week of decoupling from the stock market, Bitcoin fell in pace with U.S. equities on Friday. After nearly a week in neutral, the Bitcoin fear and greed index has returned to extreme dread.
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