Following the recent news from the US Federal Reserve, crypto asset markets began their downturn during the morning trading session on January 27.
In terms of total market value, crypto markets have lost another 3.3 percent on the day, bringing the total to $1.70 trillion. As the selloff continues, an extra $116 billion has fled the space in the last 12 hours.
The total market capitalization has plunged to levels last seen in early August, marking a six-month low. Since the beginning of 2022, crypto markets have lost 26% of their value, equating to about $600 billion in lost value.
According to CoinGecko, Bitcoin has lost 4.4 percent of its value, falling to $35,776. Ethereum has lost a similar amount, falling to $2,371. At the time of writing, the rest of the crypto market is a sea of red, with Solana, Terra, Polkadot, and Avalanche all losing 8-10 percent of their value.
In March, the Federal Reserve raised interest rates.
The newest pronouncement from the United States Federal Reserve spurred the sell-off. The Federal Reserve of the United States said on January 26 that it will begin raising interest rates in March.
These efforts are part of a larger effort to alter pandemic-related measures that have resulted in excruciatingly high inflation rates. Inflation in the United States is at a four-decade high of 7% (far beyond the Federal Reserve’s target of 2%), which is affecting consumers.
The central bank’s strategy for combating this out-of-control inflation is to raise interest rates.
According to sources, Fed Chair Jerome Powell stated that
“increasing the benchmark rate, which has been zero since March 2020, will help prevent high prices from becoming entrenched.”
Scott Minerd, worldwide Chief Investment Officer of Guggenheim Partners, reacted to the news by saying:
“The #Fed is trying to do something impossible—not shock the market while being an aggressive #inflation fighter.”
Gary Black, an SEC-registered investment adviser and Managing Partner of The Future Fund, believes the move isn’t inherently bearish:
“Fed signaled it would start raising int rates “soon”, stuck with end of tapering in Mar,”
“and made no mention of balance sheet timing. In sum, the Fed made no change to its previous communications. After the huge YTD selloff in the market, this is bullish.”
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