The bitcoin (BTC-USD) price swooned on Thursday in London as investors digested the news that the US Federal Reserve plans to taper its $120bn (£88bn)-a-month in bond purchases.
This marked the first tentative steps towards winding down its post-COVID money-printing programme that had spurred on many crypto bets — with investors buying bitcoin as a hedge against inflation.
The Fed said it plans to reduce the pace of asset purchases by $15bn per month, starting in November. This will mean Treasury purchases will drop to $70bn from $80bn. Government-backed mortgage security purchases will also drop to $35bn per month from $40bn.
Bitcoin lost around 5% following the announcement.
The price of one bitcoin as of 10.30am GMT was $61,770, down 2.4% from the previous day of trade.
Bitcoin has, since its inception, been touted as a counterpoint to inflation.
Elsewhere in the market, ethereum (ETH-USD) came off all-time highs which saw it move past $4,600 to trade at around $4,500. The surge in price had come amid a bump in usage of its blockchain network.
Ethereum has also been hailed in recent weeks as a hedge against inflation due to the difference between the number of tokens issued and destroyed or “burned”. This turned negative in the last seven days on aggregate for the first time, according to blockchain tracking site watchtheburn.com.
Gains over the past week for the number two cryptocurrency are around 15%, thanks to optimism around its transition to Ethereum 2.0.