Bitcoin tumbles 8% and other cryptos crash as hawkish Fed minutes whack risky assets

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Bitcoin was down more than 8% Thursday, and the cryptocurrency market was a sea of red, after minutes revealed the Federal Reserve could soon start rapidly cutting back its support for the economy.

Bitcoin, the world's biggest cryptocurrency by market value, was 8.6% lower over the 24 hours to 4.50 a.m. ET on the Coinbase exchange, trading at $42,776. The sharp drop put BTC more than 35% below a record high of close to $69,000 touched in November.

Ethereum, the second-biggest token, plunged more than 12% to $3,336. Binance coin slumped around 8%, solana dropped roughly 13%, and XRP was about 8% lower.

The crypto sell-off began Wednesday after the Fed released «hawkish» minutes from its December meeting, which showed the US central bank could tighten monetary policy faster than previously expected.

In December, the US central bank said it would speed up reductions in its bond purchases and signaled that interest rates would rise in 2022 as it grapples with the strongest inflation in 39 years.

Yet the minutes released Wednesday show policymakers could well go even further and faster than that, and the central bank could even start selling the bonds it bought during the coronavirus crisis.

«It may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,» they said.

Read more: 9 crypto experts told us their investing outlooks for 2022, from bitcoin price predictions to high-conviction altcoin picks and what's next for regulation

The reaction in the markets was swift. Bond yields shot up and cryptocurrencies and technology stocks — two asset classes that have benefited the most from the Fed's ultra-loose monetary policy — got trashed.

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