Ethereum cuts profits, Bitcoin pushed below $ 40,000 as the Fed announces plans to reduce the throttling

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Ether (ETH) and Bitcoin (BTC) pulled back on Wednesday as investors waited for new guidelines from the US Federal Reserve (Fed).

ETH price slipped 0.57% to $ 2,857 while BTC / USD prices rose 0.68% and changed hands at around 10:30 a.m. EST at $ 39,739. Still, both pairs hit their current levels after revising down from their respective intraday highs of $ 2,391 and $ 40,925, respectively.

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Ethereum and Bitcoin Trends in Recent History. Source: TradingView.com

Traders increased their exposure to the cryptocurrency market after Tesla’s Elon Musk, Ark Invest’s Cathie Wood and Twitter’s Jack Dorsey spoke for Bitcoin during The B Word conference last week. Further tailwind came amid speculation about Amazon’s plans to accept BTC as payment, a rumor the retail giant later denied.

Ether, whose 30-day correlation with Bitcoin is 88% positive, moved in parallel with Bitcoin. Their synchronized price trends continued into Wednesday’s New York trading session, just as markets waited for the Federal Reserve to announce its plans to reduce the throttling.

Talk about talking about tapering

Federal Reserve officials will wrap up their two-day monetary policy meeting on Wednesday with a statement scheduled at 2:00 p.m. EST. Investor focus will be on Chairman Jerome Powell’s signals as to how and when the Fed would begin unwinding its asset purchase program, as well as possible changes in its views on inflation.

In detail, the US consumer price index has boomed, reaching 5.4% yoy. As a result, up to 54% of Americans think the US economy is in bad shape, according to a survey by the Associated Press-NORC Center for Public Affairs Research.

But the Fed has wiped out higher consumer prices by calling them “temporary”. As a result, Powell, speaking to Congress earlier this month, said the central bank would continue its $ 120 billion monthly bond purchase program, raising fears that it would cause further spikes in inflation, particularly in the real estate sector.

Brian O’Reilly, Head of Market Strategy at Mediolanum International Funds, noted that there are no signs of inflation cooling in the upcoming meetings – buy program. He added:

“There will be no change, but they are at a stage where they are starting to talk about tapering.”

What will happen next to Bitcoin and Ethereum?

The biggest flaw in the Ethereum and Bitcoin markets is that their valuations may not be sustained without adding to the Fed’s liquidity.

Related: Bitcoin Bull Outlines 7 Steps To More Fiscal Incentives And Higher BTC Prices

Meanwhile, the strong foundation is that significant capital is on the verge of entering the market. A report from DataTrek Research finds that retail investors are holding $ 400 billion on Robinhood alone to get in on the next big slump. FRED’s Retail Money Fund also finds that retail investors hold over $ 1 trillion, up from $ 643 billion in 2015.

The monetary values ​​of retail funds show that investors have more than a trillion dollars at their disposal. Source: FRED

“We live in an unprecedented era of fiscal and monetary stimulus,” noted Anthony Pompliano, a prominent crypto advocate and partner at Pomp Investments, in one of his recent client notes. He added that investors would do much better if they invested money in financial instruments than they would hold cash or assets with negative returns. He said:

“If our government and business organizations continue to ban bear markets and prohibit market corrections through their intervention measures, then the market will only be allowed to rise higher and higher over time.”

Tim Frost, CEO of DeFi wealth management platform Yield App, weighed concerns about analysts’ renewed upward outlook for Ether and Bitcoin.

He told Cointelegraph that markets could continue their downtrend after a “brief rally” with Bitcoin falling as low as $ 20,000 and Ethereum falling at the same time, adding:

“An altcoin revival is still a long way off. The crypto fear and greed index is also still very heavily skewed towards fear – in fact, it has been in that direction for the longest time. This is not the beginning of a new bull run as much as the bear who is surprised while napping. “

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, so you should do your own research when making a decision.