After skyrocketing earlier this week, Bitcoin fell to just above $27,000 on Wednesday afternoon as the Federal Reserve announced a rate hike of a quarter of a percentage point.
After reaching an intraday high of $28,803 before the Fed’s announcement, the most popular cryptocurrency dropped about 3.5%, to $27,100, on the news. Fed Chairman Jerome Powell also indicated that a rate cut was not likely for the rest of the year.
“Rate cuts are not in our base case,” Powell said.
The second-leading cryptocurrency, Ether was also down about 3.8%, to $1,700, after reaching an intra-day high of $1,821 just days after it hit a seven-month high, according to CoinMarketCap.
The two largest cryptocurrencies by market cap had seen a recent boost following the collapse of Silicon Valley Bank on March 10. Advocates pointed to the decentralized nature of some cryptocurrencies as an alternative to the centralized banks like SVB, and later Signature Bank, that needed to be backstopped by the Federal Reserve.
On Wednesday, Powell emphasized that SVB’s management “failed badly” by growing the bank quickly, exposing it to significant liquidity risks and interest rate risks without proper hedging.
He added that an investigation into SVB’s failure is being led by Vice Chair for Supervision Michael Barr. Once the review concludes, the Fed will decide what policies to implement to prevent a similar situation, he said.
Powell was particularly interested in the speed of the bank run on Silicon Valley Bank, which he said was “faster than historical record would suggest.”
“My only interest is that we identify what went wrong here,” he added. “How did this happen, is the question. What went wrong?”