Key takeaways:
- After three weeks of mostly sideways price movement, Bitcoin lost 8% and dropped below $22,000 today
- The drop in the value of Bitcoin coincides with the release of the Fed’s report that outlined high interest rate monetary policy would likely continue until 2024
- Ethereum, BNB, Cardano, and the majority of other digital assets also experienced large price drops
Bitcoin hits three-week low as sell-off hits the crypto market
Bitcoin lost more than -8% today, plunging to late July price levels and erasing most of the gains accrued in the past three weeks. BTC/USD traded as high as $25,130 earlier this week and hit a daily low of $21,510 earlier today.
The drop in the value of the world’s largest cryptocurrency comes on the heels of the announcement of the US Federal Reserve, which revealed in Wednesday’s report that the strict monetary policy of interest rate hikes would likely continue for the better half of the next year.
The report documenting last month’s meeting of the Federal Open mark Committee (FOMC) noted that the Fed would continue raising interest rates as long as the 2% inflation rate goal is achieved. The government agency believes that inflation will eventually stabilize at 2% sometime in 2024. For context, the US Consumer Price Index (CPI) hit its highest point in decades in June 2022, reaching 9.1%, due to the rising prices of energy and other essentials.
Earlier this month, the Bureau of Labor Statistics revealed that the CPI did post a year-over-year increase of 8.5% in July, which is a notable decrease from the month before, which suggests that the FOMC’s policy of increasing interest rates does help in brinding the inflation rate down.
Prominent crypto analyst “il Capo Of Crypto”, with nearly half a million Twitter followers, wrote on Friday that consolidation below $22,500 forecasts a bearish outlook for Bitcoin. “New lows are just a matter of time,” he added.
It is worth noting that Bitcoin, much like other expansionary assets like tech stocks, performs best in a low interest rate environment feaguring high velocity of money and easy access to capital.
In addition to Bitcoin, the price of virtually all other digital currencies also nosedived in the last 24 hours. Apart from Gnosis, which is showing a 4.7% daily price upswing, all other top 100 market cap coins are showing negative price changes.
Ethereum is down -7.4%, BNB -8.7%, Cardano -14.1%, XRP -10.3%, Dogecoin -14.4%.
The sudden drop in the market value of digital currencies has led to over $570 million in liquidations. According to CoinGlass, Bitcoin derivative traders alone lost $216 million in the past 24 hours.
