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Bitcoin Blowout: Slide Continues After Hawkish Fed Comments

Bitcoin, the biggest cryptocurrency, also struggled in the face of tech-stock declines and has slumped 15% since Dec. 27.
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Bitcoin is continuing its slide Thursday, after hawkish commentary from the Federal Reserve and as technology stocks continue to drop.

The biggest digital currency recently traded at $42,988, down 1%, and has dropped 15% since Dec. 27.

Ethereum also has slid, recently trading at $3,399, down 2%.

Bitcoin advocates contend that it can serve as a hedge against rising inflation and falling stocks, but that’s not happening. Consumer prices soared 6.8% in the 12 months through November, the highest in 39 years.

Wednesday’s minutes from the Fed’s policy meeting last month said rampant inflation and a red-hot job market could necessitate rate hikes “sooner or at a faster pace than participants had earlier anticipated.”

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That led many economists and investors to forecast a rate increase in March, after the Fed’s planned completion of its bond-buying tapering. The CME FedWatch tool indicates federal funds traders see a 71% chance the Fed will move in March.

That’s obviously not reassuring for bitcoin holders. To be sure, bitcoin proponents could argue that the cryptocurrency is falling because investors believe the Fed will get inflation under control with its tightening. So there would be less need to hold bitcoin as an inflation hedge.

As for tech stocks, the Nasdaq Composite index, which has a heavy tech concentration, recently stood at 15,705, down 0.39%. It dropped 5% combined Tuesday and Wednesday. Clearly, bitcoin isn’t withstanding that decline.

Many bitcoin bulls remain unbowed. The currency could reach $100,000 as it supplants gold’s role in providing a store of value through thick and thin, according to Goldman Sachs

Still, events have shown over the years that this “value” can go down as well as up.