(NEW YORK) — The price of bitcoin has tumbled about 12% from a record high reached earlier this week.
After topping $108,000 for the first time on Tuesday, the world’s largest cryptocurrency dropped to a price below $93,000 in early trading on Friday. Bitcoin soon recovered some of those losses, settling around $95,000 at 9:30 a.m. ET.
The selloff rippled through the wider cryptocurrency market. Ether, the second-largest cryptocurrency, ticked down about 1%. Lesser-known dogecoin fell 4% and crypto-trading exchange Coinbase fell nearly 2%.
The slide for bitcoin has largely come after the Federal Reserve announced late Wednesday that it expects fewer interest rate cuts next year.
Lower interest rates typically stimulate economic activity, drive up corporate profits and lift the value of forward-looking assets like stocks and cryptocurrencies. In theory, a longer-than-expected period of high interest rates could diminish those returns.
The Fed’s forecast sent stocks falling within minutes and helped push bitcoin to its lowest level in weeks.
The recent slide for bitcoin erases some of the gains enjoyed since the election of former President Donald Trump, who is widely viewed as friendly toward cryptocurrency. Still, the price has climbed about 36% since Election Day.
Bitcoin had climbed to a new high earlier this week after Trump reaffirmed support for a U.S. bitcoin strategic reserve.
A U.S. bitcoin strategic reserve would amount to a substantial government holding of bitcoin similar to the country’s stockpile of oil or gold. Bitcoin bulls expect such a potentially large acquisition of bitcoin to drive up demand and hike the price.
Supporters of a bitcoin strategic reserve also say the asset would help diversify the nation’s financial holdings, protecting it from the possible decline in value of other assets, such as the U.S. dollar.
Since the price of bitcoin is highly volatile, a large purchase of the asset could end up threatening the nation’s financial stability rather than safeguarding it, some critics say.
The major stock indexes rebounded on Thursday, recovering some of the losses they took after the Fed’s unwelcome forecast.
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