Bitcoin suffers from Fed 'tapering'; holds $60,000

The US Federal Reserve (Fed) will begin reducing its massive purchase program to alleviate the effects of the pandemic, as the market has confirmed. This caused falls in Bitcoin and altcoins, but they seem to have recovered on Thursday. The queen of cryptocurrencies gave up 5% after the announcement that it will reduce its purchases by $15 billion a month, which until now amounted to $120 billion, but is holding comfortably above $60,000.

"The cryptocurrency is struggling to generate an enormous amount of upside momentum as it continues to drag itself higher since slipping briefly below $60,000 last week," comments Craig Erlam, analyst at Oanda. "Perhaps that's a sign of a larger correction to come," he warns.

As for the other altcoins, Ethereum extended its recent all-time highs on Wednesday to nearly $4,700 and set another record in closing prices, ending the day at $4,607. Gains over the past week for the number two cryptocurrency are around 15%, thanks to optimism around its transition to Ethereum 2.0.

In terms of total capitalization, it remains at all-time highs, at almost $2.8 trillion, thanks to rises in Binase coin, Ripple, Solana or Polkadot, which have advanced by more than 20% in the last seven days.

All in all, experts expect investors to digest the Fed's message, as the US central bank's money printing machine was what drove purchases in risk assets, such as Bitcoin. The central bank's 'tapering' may lead to a slowdown in investments in the cryptocurrency market.

For the time being, it is striking that the trading volume in the Bitcoin spot market continued to decline despite the price rally during the last month. In fact, the seven-day average is down nearly $1 billion from the previous week, according to data compiled by Arcane Research.

"Trading volume has declined substantially since Bitcoin hit its all-time high on Oct. 20, but should pick up considerably if Bitcoin challenges its all-time high again soon," Arcane wrote in a report on Wednesday.

Experts have not yet given up hope that new all-time highs will be seen again before the end of the year. Without going any further, JP Morgan experts believe that alternative assets, which include cryptocurrencies, "should continue to outperform in 2022." A price target of $73,000 seems reasonable, they comment, if relative volatility continues next year.