The crypto market is in free fall as speculation of the next largest Federal Reserve rate increase in 40 years mounts. Bitcoin and Ethereum are losing a lot of value and tumbling big among the top 10.
The weekends have not been good for the crypto market as of late. In fact, these past few months, major hits and losses occurred during this period- ultimately negating any gains made throughout the week.
Last week, the much-anticipated Ethereum Merge event took place. Crypto investors were hoping that it would help to redeem the market. But then, the United States Fed rate hike is incoming, and the prospect has crashed the crypto market by double digits. An inflationary policy shift from the Fed could have a huge and negative impact on crypto markets and other risky assets.
Crypto markets enter another bloodbath
On Monday, a slide in cryptocurrencies put Bitcoin at the lowest level it has been since 2020. This aligns with the shift in sentiment from excitement to doubt due to the waves of monetary tightening that are set to occur this week in Europe and then later on in the U.S.
According to CoinMarketCap, the current price of Bitcoin is $18,489.59. The currency has dropped 7.86 percent in the last 24 hours. Ethereum’s value is $1,302.40 as of writing. In the last day, ETH has fallen by 10.59%.
The major update to the Ethereum blockchain, called Merge, moved the network over to PoS (Proof of Stake) this past weekend. However, ETH’s value has fallen since then due to speculation that last week’s remarks from U.S. SECs Chairman Gary Gensler may result in more regulation for ETH under the new structure. The recent upgrade has left many trades in disarray.
Following the crashes of Terra LUNA and UST in the last few months, the crypto market has been struggling. With another Fed rate hike incoming, many are predicting one of the most severe crypto winters yet.
The Federal Reserve is widely expected to hike interest rates on Wednesday, and investors are preparing for increased market volatility. The crypto market is struggling as borrowing costs rise and liquidity dries up. U.S. equity futures were in the red, and a dollar gauge pushed higher in signs of wider caution.
The XRP token, linked to Ripple Labs Inc., dropped sharply by as much as 13.5%. This was during the same time that reports circulated claiming that both the firm and US SEC would rather have an immediate judgment in a court case. The outcome determines whether or not Ripple was “irresponsible” in asserting that XRP isn’t a regulated security.
According to CoinGecko figures, the market value of digital tokens has decreased by more than $70 billion in the past 24 hours. This is a significant drop from the $3 trillion peak that was reached earlier this year. The cause of this dip appears to be due to tighter financial conditions and leveraged crypto firms that have experienced blowups recently.
The awaited effects of the Fed rates on the crypto market
The Federal Reserve’s decision on key interest rates is the week’s main event. The Fed will be under pressure to react after the Consumer Price Index (CPI) reading for August turned out to be “heating” than expected.
The market now expects the Federal Reserve to raise interest rates by 75 basis points. The market does not discount the possibility that the Federal Reserve will raise interest rates by 100 basis points. If the Fed increases by 100 points, this would be its first time taking such an action since the early 1980s.
Analysts are debating whether the crypto market downtrend will continue until the Federal Reserve rate announcement passes. Last week, Bitcoin lost over $2,000 in value because of positive news affecting BTC’s price action.
The United States Dollar Index (DXY) is currently at 110, having not seen much movement in the past few days. Earlier this month, the index peaked at 110.78, its highest point since 2002, while avoiding any large drops or retracements.
Even with recent price volatility, hodlers are staying strong, on-chain data confirms. According to analytics firm Glassnode, coins held for a period of at least five years have only been increasing in value.
According to recent data, the percentage of BTC last active in September 2017 or earlier reached a new all-time high of 24.8%. The crypto market is undergoing a significant shift, prompting a game-changing warning for Bitcoin, Ethereum, and other major currencies.
The Biden administration has instructed U.S. government agencies to be stricter with enforcing rules on bitcoin and other cryptocurrencies. This could put the $1 trillion market in conflict with regulators after the White House Office of Science and Technology suggested that bitcoin could be banned.