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Bitcoin drops to six-month low

price has been under serious pressure since the Federal Reserve’s early November meeting, , reducing stimulus in the financial system. That downtrend continued through much of December and into January. After peaking above $51,000 in late December, the digital currency fell to about $41,000 in early January and has spent the past couple weeks hovering in the low $40,000 range around $42,000. This latest drop saw the cryptocurrency trade below the $40,000 level for the first time since August. After the most recent decline, Bitcoin is trading near six-month lows. On Thursday, the Federal Reserve exploring the creation of a “digital dollar,” essentially a cryptocurrency version of the U.S. dollar backed by the central bank. While the Fed has not taken a position on the creation of a currency yet, the paper explores the pros and cons of doing so. Now the Fed is seeking public comment on the topic.

The Fed reduces stimulus as inflation ripples through economy

At its December meeting, , purchasing even fewer bonds than it had projected in November. The new pace means the Fed will stop buying bonds by March 2022. From there, the Fed has said that it will eventually raise interest rates, as conditions warrant. “With inflation having exceeded 2 percent for some time, the committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment,” said the Federal Open Market Committee in a prepared statement. Now market analysts are expecting the Fed to increase interest rates at its upcoming March meeting. According to , the market is pricing an 87 percent probability of the Fed boosting rates by 25 basis points, with a 3 percent probability of a 50 basis point bump. While Bitcoin’s price peaked at $68,990.90 in early November, the cryptocurrency’s value has steadily weakened since then. Nevertheless, Bitcoin remains atop by total market capitalization.

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Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. SHARE: Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money.

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