Bitcoin fell Wednesday after the Federal Reserve raised its key interest rate by a quarter of a percentage point, as widely expected, while the Fed chairman Jerome Powell said it’s “the most likely case” that the central bank would refrain from cutting its key interest rate this year.
The largest cryptocurrency
BTCUSD,
dropped 2.5% Wednesday to around $27,557, according to CoinDesk data.
The pullback came after bitcoin rallied almost 50% in less than two weeks, as three regional U.S. banks collapsed and the Fed announced an emergency loan program to backstop depositors at the institutions and across the whole banking system.
Bitcoin surged as the Fed injected liquidity into the financial system to relieve stress in the banking system and investors sought diversification from bank deposits, according to Peter Eberle, chief investment officer at Castle Funds.
“Bitcoin was born during the last banking crisis, and I think the recent crisis is a push for bitcoin again,” Eberle said in a call. The cryptocurrency industry has long touted itself as an alternative to government-issued currencies, like the dollar.
Still, many investors are trading bitcoin as a speculative asset, Eberle noted. “As far as the speculative nature of bitcoin, that will be more interest rate sensitive,” said Eberle. Major stock indexes also traded lower Wednesday, with the Dow Jones Industrial Average
DJIA,
down 0.5%. The S&P 500
SPX,
went down 0.3% and the Nasdaq Composite
COMP,
dropped 0.1%.
