- The Chair of the Federal Reserve confirmed plans to begin raising interest rates in March.
- Cryptocurrency markets, along with equities, reacted with sharp token price declines.
- At the time of writing, Bitcoin is down 3.15% and Ethereum is down 5.25%.
After a two-day meeting of the Federal Open Market Committee (FOMC) that concluded Wednesday, Federal Reserve Chair Jerome Powell held a press conference to outline the country’s monetary policy plans. Powell said the Fed will end asset purchases by March and will begin raising interest rates thereafter.
Ahead of the press conference, markets were optimistic and appeared bullish. Minutes after Powell began speaking, Bitcoin briefly rose, hitting a high of $38,740.
However, roughly thirty minutes after the briefing began, markets turned negative and have largely remained that way since.
At the time of writing, the market aggregator CoinMarketCap shows that BTC has erased more than 3% of its gains over the past 24 hours and is trading at $36,820. The picture is similar for Ethereum, which is in a downtrend and trading around $2,480, down about 5.5% for the day.
Stocks that historically show a relatively high correlation with Bitcoin also rose ahead of the meeting and fell afterward.
Rate hike plans sparked the sell-off
The market sell-off was triggered by the Fed’s disclosure that it will lift interest rates from near zero beginning in March and enact further rate increases to combat rising inflation pressures.
“I would say the committee intends to raise the federal funds rate at the March meeting, assuming the economy evolves broadly as expected,” Powell said.
Still, the announcement itself was not entirely unexpected: the Fed had already signaled its intention to taper asset purchases and to move toward policy normalization.
Inflation is currently running above the Fed’s 2% objective. Policymakers expect that raising benchmark rates will help prevent elevated prices from becoming entrenched.
Altcoin market performance
Alongside market leaders Bitcoin and Ethereum, many altcoins fell in dollar terms following the Fed announcement.
Solana has suffered some of the worst losses among the top 10 cryptocurrencies by market cap. According to CoinMarketCap data, SOL is trading at $92.60, down about 8.3% over the past 24 hours.
Recent blockchain outages have compounded pressure on the network, leaving SOL deep in the red.
Terra’s LUNA dropped below the key $60 level, while Polygon’s MATIC is trading around $1.60, roughly 2.7% below its price 24 hours earlier. Cardano (ADA), down about 5% in the same period, is barely holding the $1.05 support and is trading near $1.07.