Bitcoin

Bitcoin Drops to 21k After Fed Hikes Rates by 75 Basis Points: Why a Rebound is Likely Imminent

Bitcoin going down in price

Bitcoin in turmoil

Bitcoin is currently hovering around $21,000, after dropping from $22,000+ last night, since the Fed has raised interest rates by 75 basis points. This is the first time the Federal Reserve has made this move since 1994; almost 30 years ago, showing the weakness of our current economy. President Biden asserted that he has "never been more optimistic about [the economy]," while mainly avoiding the topic of inflation.

Firms are getting git hard

Many are concerned that Fortune 500 company, Microstrategy, led by CEO and famous Bitcoin bull Michael Saylor, may receive a margin call since their cost basis near the current price of BTC. Saylor, however, has dispensed these fears, saying that the margin call talk is "much ado about nothing." The same can't be said for the share price, as it has cratered from the mid 200's to mid 100's in the last month. Saylor is naturally still bullish on Bitcoin, saying it's now an "ideal entry point." 

Despite Saylor being a Bitcoin permabull, he still has financial sense. He wouldn't say these things unless he truly calculated the potential returns of Bitcoin being worth an investment.

While MicroStrategy may be ok for the time being, other firms may not be so lucky. Speculation is growing that well known crypto-focused hedge fund Three Arrows Capital, may be on the verge of collapse. This is supported by a cryptic tweet made by founder Zhu Su saying they are "fully committed to working this out."

In addition to these woes, a new bill by Republican Senator Cynthia Lummis and Democrat Senator Kirsten Gillibrand implies that most altcoins are securities and not currencies, or property, as the IRS sees it. The two notable exceptions were Bitcoin and Ethereum luckily. If the top two cryptocurrencies on the market were deemed securities by the federal government, the result for markets obviously would not be good.

A rebound is likely

Even though the crypto market is currently facing many challenges, there is good news, such as the Bitcoin hash rate reaching an all time high amid the crash. Increases in the Bitcoin hash rate typically correlate to higher prices, but this remains to be seen now. It could be a delayed effect. While we are indeed in a bear market now, given the positive occurrences above, a rebound is likely imminent.

Cryptohopper