Bitcoin slipped below $29,000 early Thursday alongside stocks after the U.S. Federal Reserve suggested maintaining its hawkish stance in the meeting minutes released on August 16.
Bitcoin dropped by 2% overnight and is now trading at $28,549.
The downturn dragged the broader crypto market down with it, as the total market capitalization dropped by 1.7% overnight, or nearly $20 billion, per CoinGecko.
Ethereum price is also struggling to hold on to the $1,800 support level, last trading at $1,795 after dropping 1.5% in the last 24 hours.
In the equities market, the S&P 500 index continued its downturn from Tuesday, dropping 0.76%.
The dollar index (DXY) against other major currencies gained 0.54% this week from Fed’s rate expectations, hitting a one-month high yesterday.
Inflation fight far from over, says Fed
During the Fed policy rate meeting last month, it increased the benchmark interest rate to a 22-year high, bringing the interest rate to 5.25%-5.50%.
Many expected that the rate hike would be one of its last after an aggressive increase from zero percent in March 2022 in its attempt to stomp out rampant inflation.
The central bank’s rate hikes have been one of the most significant factors limiting the rise of risk assets such as stocks and cryptocurrencies.
The higher borrowing costs stifle growth and expansion and attract investors to safer bets like Treasury bonds. It’s also one of the key tools the Fed has in its arsenal to cool rising consumer costs.
However, the latest meeting minutes show that the Fed’s decision-making committee “remains highly attentive to inflation risks.”
The document also stated that the job sector outlook was positive, with “robust” job gains and a low unemployment rate.
The market’s expectation of a rate hike has increased after the release of the minutes.
CME’s FEDWatch tool shows that traders increased their rate hike expectations from 10% to 13.5% after the release.
The press release added that the Fed might consider enacting policies “that may be appropriate to return inflation to two percent over time.”
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