Bitcoin price slides ahead of Fed rate meeting

·2-min read
Bitcoin was down on Tuesday. Photo: Getty

Bitcoin dipped into the red on Tuesday ahead of this week's Federal Reserve (Fed) interest rate meeting.

The global cryptocurrency market cap stood at $1.2tn (£980.7bn), a decrease of 0.8%, according to Coingecko data.

Bitcoin (BTC-USD) was down 2% to $27,786, while ether (ETH-USD) fell 2.8% to $1,746.

Investor confidence is being tested ahead the Federal Reserve Open Committee Meeting (FOMC) this Tuesday and Wednesday.

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The Fed faces a decision on whether to continue its aggressive fight against inflation or put it on hold to avoid a shortage of liquidity in markets.

On Monday, European and Japanese central banks announced measures to ease strains on the financial system, including lending more dollars if necessary.

Bitcoin has had a positive correlation with lower interest rates in the past, and speculation of a less aggressive Fed combined with banking sector fears could have contributed to the digital assets upward momentum in the past week, according to analysts.

Goldman Sachs chief economist David Mericle forecast in a note that the Fed will pause interest rate hikes because of stress on the banking system.

“While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient,” he said.

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“We think Fed officials will therefore share our view that stress in the banking system remains the most immediate concern for now.”

Ahead of this week's Fed decision, Asian stock were trading higher on Tuesday, seemly undeterred by another possible interest rate hike and the risk of more global banks falling into distress.

In Hong Kong the Hang Seng Index (^HSI) was up 1.36% in early trading and South Korea’s Kospi (^KS11) advanced 0.38%. Japanese markets were closed for a holiday.

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