Crypto markets shakeout as Federal Reserve leaves US interest rates on hold

The Federal Reserve's latest announcement has promoted fear among investors. Bitcoin and Ethereum wiped recent gains as the overall cryptocurrency market suffered a bloodbath. 

Bitcoin price wiped recent gains with Fed's latest announcement

Historically, Bitcoin has acted as a hedge against inflation; however, the asset has traded like a stock in response to the Federal Reserve's monetary policy changes. 

When the central bank increases interest rates, Bitcoin price generally gives up its gains. Though the Federal Reserve left interest rates unchanged at the last meeting, the central bank did reveal plans to introduce a hike in March. 

After the two-day meeting, the Fed issued a statement that reads:

With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.

The prospect of the central bank tightening monetary policy induced fear among investors, triggering a bloodbath in crypto markets. 

Mike Novogratz, CEO at Galaxy Investment Partners, was quoted as saying:

A lot of the beatdown has happened. It's going to be a tough year for assets. ... We're going through a paradigm shift.

Experts have argued that a hike in interest rates could lead to a complete reversal of Bitcoin and Ethereum gains from 2021, to the extent that traders holding stablecoins in their portfolios would be better off. 

High interest rates drive capital away from speculative and volatile markets and into government bonds. Analysts have argued that the shift in capital may have already been priced in. 

@inmortalcrypto, a pseudonymous cryptocurrency analyst, predicted that the asset could plummet further if Bitcoin price drops below $35,000. 

FXStreet analysts have evaluated the Bitcoin price trend and noted a reversal candle. Analysts believe that Bitcoin price could target $48,000.