Cryptocurrency prices have plummeted: Bitcoin is now worth less than $39,000, and Ethereum is down 14%.

 Bitcoin (BTC) and other top cryptocurrencies fell further on Friday, following a drop in overnight trading. According to CoinMarketCap, the world's largest digital currency, Bitcoin, was trading at $38,356 Friday afternoon, down about 11% in the previous 24 hours. Bitcoin has dropped by more than 17% year to date. Many other popular cryptocurrencies have fallen even further as crypto markets have joined other US financial markets in decline.

Cryptocurrency prices have plummeted

Markets continue to expect the Fed to raise interest rates, which is weighing on both growth stocks and cryptocurrencies. Bond prices, which move in the opposite direction of rates, have been harmed by the expectation of rising rates. Furthermore, crypto traders may be concerned about statements made by Russia's central bank on Thursday regarding a proposed cryptocurrency ban.

In the mid-afternoon of Friday, Ethereum's price plummeted 14 percent to $2,777. The world's second-largest cryptocurrency hit an all-time high above $4,800 in November but has since fallen significantly. So far in 2022, it's down nearly 25%.

Cardano was trading at $1.20 by mid-afternoon Friday, down a whopping 14.1 percent. Solana dropped 12% to $124.29.

Meanwhile, Dogecoin, a popular meme coin, was trading at $0.1513, down 8.8 percent.

Other major cryptocurrencies that have fallen in value in the last 24 hours include:

  • Binance Coin has dropped 10.3 percent.
  • Polkadot – a 12.7 percent drop
  • Avalanche has dropped 15.3 percent.
  • XRP has dropped 11.6 percent.

  • Bitcoin prices have been declining for months

    Bitcoin's price has been under significant pressure since the Federal Reserve's early November meeting, when the central bank announced that it would begin tapering its bond purchases, reducing financial system stimulus.

    Source: Yahoo Finance, January 2022

    This downward trend persisted throughout much of December and into January. After reaching a high of more than $51,000 in late December, the digital currency fell to around $41,000 in early January and has spent the last few weeks hovering in the low $40,000 range around $42,000. For the first time since August, the cryptocurrency has traded below the $40,000 mark.

    The Federal Reserve released a 40-page paper on Thursday exploring the creation of a "digital dollar," which is essentially a cryptocurrency version of the US dollar backed by the Fed. While the Fed has not yet taken a position on the creation of a currency, the paper examines the advantages and disadvantages of doing so. The Fed is now seeking public input on the subject.

    The Fed’s tightening plans with surging inflation hitting the economy

    The Fed announced at its December meeting that it was speeding up its taper, purchasing even fewer bonds than it had planned in November. The Fed's new pace means it will stop buying bonds in March 2022.

    Following that, the Fed has stated that it will raise interest rates as conditions warrant.

    "With inflation having surpassed 2% for some time, the committee believes it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment, " the Federal Open Market Committee stated in a prepared statement.

    While Bitcoin's price peaked in early November at $68,990.90, the cryptocurrency's value has steadily declined since then. Nonetheless, Bitcoin remains the most valuable cryptocurrency in terms of total market capitalization.