On Monday, Bitcoin dropped under the crucial $20,000 mark, driving down the price of cryptocurrencies as Federal Reserve Chair Jerome Powell expressed his hardline views on the direction of American monetary policy.
Over the last day, the price of Bitcoin dropped by 0.8% to $19,882. Over the last seven days, the token’s price fell by roughly 8%. The market capitalization of all cryptocurrencies slipped below $1 trillion as Ethereum, the second-largest cryptocurrency in the world, dropped close to 2% in the last 24 hours to $1,465 per coin.
After Powell of the Fed refuted the idea of a doveish turn by the central bank, losses in cryptocurrency prices mirrored those observed in the majority of risk-driven markets. Instead, the Chair cautioned that until inflation is under control, American individuals and companies will have to deal with sharp increases in interest rates.
His remarks precipitated significant drops in stock markets on Friday, with the Nasdaq 100 index—the equity market’s closest match for cryptocurrencies—falling more than 4%.
The loose monetary policy enjoyed by cryptocurrencies and risk-driven markets over the previous two years was abruptly reversed by the Fed, which increased interest rates four times this year. Crypto’s losses are anticipated to continue as the majority of traders now anticipate a 75 basis-point rate hike by the Fed in September.
Increased borrowing costs and rising inflation put a cap on how much money can be put into speculative assets like cryptocurrency. Investment is anticipated to fall similarly for technology equities, which had previously benefited from lax monetary policy and reached record highs.
Since reaching a record high in November 2021, Bitcoin has fallen more than 60% and lost more than half of its value. The Nasdaq 100 has lost close to 24% of its value this year.
The hawkish indications from the Fed helped the U.S. dollar the most, which increased by 0.3% on Monday to nearly reach a 20-year high. Additionally, U.S. Treasury yields were trading at high levels.
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