Bitcoin, Ethereum Down 6% as Uncertainty Around Fed Taper Lingers

By Stacy Elliott

Market troubles from last week still haven't cleared up. As of Monday afternoon, Bitcoin and Ethereum were down about 6% from the previous day, according to CoinGecko. 

Last week closed with news that Chinese real estate developers Evergrande and Kaisa had missed U.S. dollar bond payments, causing stocks and crypto markets to dip. Analyst and trader Alex Kruger told Decrypt on Friday that we could also be seeing the impact of “performance fees, bonuses, audits, wash sales, [and] tax loss harvesting.” 

But now the pressing concern is whether the Federal Reserve will alter its plans to slow down its bond buying program, concluding it in March instead of June. The impact was apparent in crypto and traditional markets on Monday.

Bitcoin’s price has slid since Friday. It’s been trading at just over $47,000, down 31% from the $69,044.77 all-time high it set on Nov. 10, 2021. And Ethereum, which was trading at a little more than $4,000 at the end of last week, lost ground over the weekend. It was trading at about $3,800 on Monday, according to CoinGecko.

Things looked worse for other coins in the top 10. Solana’s native SOL was lagging 9% and Cardano’s ADA was down 7.5% from the day before. Meanwhile, the global crypto market cap was sitting at $2.26 trillion, a 5% drop over the last day.

Even exchange-traded products pegged to crypto assets, like the Grayscale Bitcoin Trust (GBTC) and ARK Innovation ETF (ARKK), were down 4% and 3% respectively on Monday.

Traditional markets weren’t faring much better. Since its open on Monday morning, the New York Stock Exchange Composite was down 124 points, or 0.75%, from its close on Friday, according to Yahoo Finance. 

Up until the end of last week, economists were saying they expected the Fed to increase the rate of its taper, which would mean an early conclusion to the treasury and mortgage-backed bond buying programs it’s been using to prop up an economy that continues to suffer from the effects of the COVID-19 virus. 

“We expect the Fed to announce a doubling in the pact of tapering at the December FOMC meeting,” Deutsche Bank economists wrote in a note last week, “bringing the monthly drawdown to $20 billion and $10 billion per month for Treasuries and MBS, respectively.”

If that were the case, the purchases would end in March instead of June. But now there are signs that Fed officials could be taking the omicron variant of the COVID-19 virus more seriously than they did the delta variant.

“Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions,” wrote Fed Chairman Jermoe Powell, in comments meant for a Tuesday appearance before the Senate Banking Committee.

It remains to be seen whether that “greater concern” will lead Fed officials to keep the bond buying programs on their original timeline. For now, it seems investors have been keen to offload risky assets until there’s some clarity around the Fed’s monetary policy.

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