Bitcoin Slumps As Federal Reserve Stays Focused On Inflation Hiking Interest Rate By 25 Bps

Bitcoin (BTC), the world's largest crypto asset by market capitalization, sunk below $26,700 and fell 7.2% following the U.S. Federal Open Market Committee's (FOMC) announcement of another quarter-point hike in interest rate amid the ongoing banking crisis in the United States.

Over the past few days, Bitcoin soared to a new year-to-date high of $28,865, as the traditional banking sector braced for the impact of the fallout following the collapse of three major banks in the country, Silvergate Capital, Silicon Valley Bank and Signature Bank.

However, after the announcement by the FOMC, the maiden crypto lost its $27,000 psychological support and its new YTD high price of $28,865 when it traded down $26,800.

Bitcoin also saw more than $224 million in liquidations from crypto markets over the past 24 hours with around $170 million liquidated just a few hours following the Fed's interest rate announcement.

The Federal Reserve once again raised interest rates by 25 bps during its meeting Wednesday, with FOMC chair Jerome Powell noting that "we no longer expect that ongoing rate increases will be appropriate" and suggesting that more rate hikes might no longer happen for the rest of the year.

The FOMC acknowledged the U.S. banking sector's near-meltdown experience but believed that the country's banking system is resilient.

"The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks," the Federal Reserve said in a statement.

"The Committee will closely monitor incoming information and assess the implications for monetary policy. The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time," it added.

Lucas Outumuro, head of research at IntoTheBlock, said that the cryptocurrency market had "relatively high hopes of either no rate hike or very dovish comments from Powell," adding that "we did get some dovish guidance through the dot plot, but likely not as much as was priced in," but "then Yellen's comment triggered stocks and correlation dots driving crypto lower as well."

As of 5:10 a.m. ET on Thursday, Bitcoin saw a 1.64% loss over the past 24 hours and was trading down $27,713.58 with a 24-hour volume of $31,856,317,663, according to the latest data from CoinMarketCap.