[Bitcoin Now] Fed Tightening Outlook Pushes Price to $26,000 Range... Investor Sentiment Also 'Deteriorates'

Image source=Reuters·Yonhap News

The price of Bitcoin, the leading cryptocurrency, is hovering around the $26,000 level due to concerns over additional interest rate hikes by the U.S. Federal Reserve (Fed).

According to CoinMarketCap, a global cryptocurrency market tracking site, as of 1:11 PM on the 20th, Bitcoin was priced at $26,109 (approximately 35.07 million KRW), up 0.66% from the previous day. While Bitcoin was trading in the $29,000 range as recently as the 17th, it plunged to $25,400 on the 18th but has since narrowed the decline and is currently trading around the $26,000 level.

The recent sharp drop in Bitcoin’s price is attributed to concerns over further tightening by the Fed. The minutes of the July Federal Open Market Committee (FOMC) meeting indicated that if inflation does not slow down faster than expected, the Fed may proceed with additional interest rate hikes. Market expectations suggest that the Fed will hold the benchmark interest rate steady at the September meeting but is likely to raise it by 0.25 percentage points at the November meeting.

The rise in oil prices since August, increasing the possibility of inflation rebounding, has also had an impact. Recent economic indicators have shown strength, raising hopes for a soft landing. This has strengthened the view that even if the Fed holds rates steady in September, it will not declare an end to rate hikes but will keep the door open for additional increases through December, maintaining a prolonged tightening stance.

Additionally, concerns have grown following news that Chinese real estate developer Evergrande (Hengda) filed for bankruptcy protection under Chapter 15 in the U.S. Bankruptcy Court in New York. Evergrande Group has been struggling financially since it officially defaulted in December 2021 after failing to repay $22.7 billion (approximately 30.4 trillion KRW) in offshore bonds for the first time. The default crisis triggered by another major real estate developer, Country Garden (Biguoyuan), is also expected to spread to the financial sector, fueling risk-averse sentiment.

Investor sentiment in the cryptocurrency market is also weakening. According to Alternative, a cryptocurrency data provider, the Fear & Greed Index, which measures investor sentiment, dropped 2 points from the previous day to 37 points (Fear). Alternative’s Fear & Greed Index ranges from 0, indicating extreme fear and pessimism about investing, to 100, indicating extreme optimism.