The Bitcoin Cash (BCH/USD) price retreated to the lowest level in a month after the warning from the Federal Reserve. It is trading at $396, which is about 75% below the highest level in 2021.
Federal Reserve warning
Bitcoin Cash and other cryptocurrencies are usually classified as risky assets. These assets tend to do well in a period of low-interest rates and then lag when tightening starts.
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In the past few weeks, the mood in the market has been a bit hawkish after the Federal Reserve hinted that it will start tightening. In the meeting, the bank said that it will double the size of tapering and then end QE by March this year.
The Bitcoin Cash and other risky assets like tech stocks in the Nasdaq 100 declined sharply on Wednesday after the Fed published its minutes.
The minutes showed that the bank will be forced to boost its tightening in a bid to fight inflation. Recent data showed that the headline consumer price index (CPI) rose by 6.2% while the core CPI rose to 4.4%. They said:
“Some participants judged that a less accommodative future stance of policy would likely be warranted and that the committee should convey a strong commitment to address elevated inflation pressures.”
Other cryptocurrencies declined as well. Bitcoin declined to about $43,000, meaning that it has fallen by more than 40% from its highest level in November. Ethereum and other altcoins declined, bringing the total market cap of cryptocurrencies to about $2 trillion.
Historically, Bitcoin and Bitcoin Cash had a strong correlation, meaning that their prices tracked one another. Whenever Bitcoin rose, Bitcoin Cash followed.
Recently, however, this correlation has ended. The same is true with Ethereum and Ethereum Classic. It is unclear why this divergence has happened.
Bitcoin Cash price prediction
The daily chart shows that the BCH price has been in a strong bearish trend in the past few months. Recently, the coin managed to move below the key support at $470, where it struggled moving below in September.
It also moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has been in a bearish trend.
Therefore, the coin will likely keep falling as bears target the key support at $350, which was the lowest level in December.
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