CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Bitcoin dips on interest rate fears

By Robert Davis

17:49, 6 December 2021

Bitcoin in front of a cryptocurrency exchange
The cryptocurrency lost more than 16% over the last seven days – Photo: Shutterstock

The price of Bitcoin plummeted over the weekend, falling by as much as $10,000 in an hour to $42,000 before recovering to around $49,000 by Monday morning.

Bitcoin has lost more than 16% over the last seven days. Ethereum, the second-largest cryptocurrency by market capitalisation, is down just 6% over the same time span.

The price drop catalysed a market-wide sell-off, with some cryptocurrencies remaining down at least 10% by 16:00 UTC Monday, according to data from CoinMarketCap.

Interest rate concerns

One potential reason for the additional volatility in the crypto markets are concerns over the US Federal Reserve’s plan to slow down its asset purchases and the decision’s potential impact on interest rates.

St. Louis Fed President Jim Bullard told the Missouri Bankers Association on Friday that the Federal Reserve should “remove monetary policy accommodation” due to strong growth in the labour markets and in gross domestic product. GDP grew 2.1% in the third quarter and 6.7% in the second quarter, the Bureau of Economic Analysis said.

Joo Kian, an analyst at Delphi Digital, wrote in a note that Fed’s back-and-forth on inflation is creating a “fearful market.”

What is your sentiment on ETH/USD?

3336.59
Bullish
or
Bearish
Vote to see Traders sentiment!

XRP/USD

0.53 Price
+0.080% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

DOGE/USD

0.12 Price
+4.170% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

BTC/USD

62,558.75 Price
+3.960% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

BCH/USD

386.85 Price
+3.990% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.50

Buying opportunity

James Butterfill, a research analyst at CoinShares, wrote in a note to investors that the price weakness over the weekend resulted in nearly $40m in outflows despite some investors seeing the event as a “buying opportunity.”

Digital assets saw an inflow of $184m last week despite the price of Bitcoin dropping 7% before the weekend, Butterfill wrote.

For comparison, Ethereum saw total inflows of just $25m and outflows of $4.7m last week.

 

Read more: What comes next after the recent bitcoin price crash?

Markets in this article

BTC/USD
Bitcoin / USD
62558.75 USD
2381.85 +3.960%
ETH/USD
Ethereum / USD
3336.59 USD
132.6 +4.140%

Rate this article

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 630,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading