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Tuesday, January 25, 2022

Bitcoin prices fall to lowest in months after US Fed remarks

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Bitcoin prices have fallen to their lowest level in months following remarks from the US Federal Reserve.

The value of the cryptocurrency has dropped from $47,000 (£34,700) earlier this week to less than $42,000 (£31,000) per digital coin.

It comes after minutes from a Federal Reserve meeting suggested that interest rates might be raised.

Concerns about the network’s capacity have also been raised in Kazakhstan as a result of recent political events.

Because of its global and decentralised nature, attributing a rise or fall in the price of Bitcoin to a single cause is difficult. But many commentators have pointed to the release of the Federal Reserve’s December meeting notes as one factor.

The minutes suggest that the Federal Reserve of the United States may raise interest rates sooner than expected and sell off some of its assets.

This could have a knock-on effect for traditional investors who hold Bitcoin, causing them to seek out less risky assets instead.

At the same time, Kazakhstan hosts a significant portion of the world’s Bitcoin mining – the process by which transactions are verified and new “coins” are created.

The vast Central Asian country has been rocked by political unrest this week, with citizens taking to the streets to protest rising fuel prices. Demonstrators seized buildings in Almaty, the country’s capital city, resulting in fatal violence, according to the country’s leaders.

Kazakhstan is thought to process nearly one-fifth of all Bitcoin “mining,” as the process is known, due to its typically low electricity prices. And an internet outage earlier this week appeared to have impacted the entire Bitcoin network’s processing power.

Here’s what happened:

  • Bitcoin started the week at a price above $47,000 per coin
  • That began to slip by mid-week to around $46,000
  • On Wednesday, the Federal Reserve minutes were released
  • By Thursday, the price fell sharply to around $42,000
  • It hit a low of nearly $41,000 at one point on Thursday before recovering slightly

The dip means Bitcoin has hit its lowest price since September 2020, down from a November peak of more than $60,000.

Other crypto-currencies have also seen price falls. Ethereum saw its value drop by more than 4% in 24 hours, from approximately $3,800 to under $3,200.

“We are seeing broad risk-off sentiment across all markets currently, as inflationary concerns and rate hikes appear to be at the forefront of speculators’ minds,” Matthew Dibb of Singapore-based crypto-company Stack Funds told Reuters.

He also warned that “there is a risk of a short-term retreat back to the mid-30s.”

Cryptocurrencies, particularly Bitcoin, continue to be chastised.

 

Following user backlash, the Mozilla Foundation, which produces the Firefox web browser among other open-source software projects, announced that it would no longer accept crypto-currency donations.

 

The organisation has accepted cryptocurrency donations for years, but a recent tweet reminding people of that fact elicited an angry response, as the digital currency’s energy consumption and unregulated nature remain controversial among many critics.

 

SourceBBC
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