The crypto market is tumbling downhill as the reigning Bitcoin continues to plunge. In the last 24-hours, BTC has lost nearly 9% of its value and is trading at $30,741. Crypto enthusiasts expect the popular digital asset to regain some of the loss over the next couple of days and set a lower high.
But the crypto market has been in blood bathe since the weekend. Analysts highlighted that BTC is more than 55% lower than its all-time high of $69,000 in November 2021. Moreover, the crypto market has become increasingly correlated to stock prices over the past year as institutions jump aboard. Price action in cryptocurrencies shows that the market doesn’t see the highly volatile assets as reliable stores of value during periods of economic uncertainty. Experts attribute the fall to nervousness over the US Federal Reserve’s determination to tackle rising inflation.
Inflation has been at its highest rate since the early 1980s. The Fed, last week, announced an interest rate hike of 50 basis points and pledged to reduce its holdings. It will sell bonds to stimulate the economy and ward off inflation. This had initially had a positive effect on inequities and crypto prices, but the pre-announcement of aggressive monetary tightening shook the market. Jerome Powell, the Fed Chair, highlighted that additional 50 basis point increases were on the table at the next two FOMC meetings. The US central bank will also allow $30 billion in the US Treasury and $17.5 billion in mortgage-backed securities to roll off its balance sheet in June.
With the crypto market now in a very vulnerable phase, buying will take off. However, crashes aren’t something new for the digital assets sector. In 2018, the popular Bitcoin recorded an 80% crash. Bitcoin is not tied or connected with any physical assets or intellectual property. Its price is exclusively tied to supply and demand, which makes it difficult to assess its fundamental value.