Bitcoin briefly dropped below $21,000 on Tuesday before bouncing back slightly, continuing its plunge as investors sold off risk assets Due To Rising Inflation Rates. Since Saturday, the value of all digital coins has fallen below $1 trillion for the first time since February 2021, wiping out approximately $200 billion from the cryptocurrency market.
Bitcoin has dropped 24% in the last seven days, and it is now trading 70% lower than its all-time high of $68,789.63 set in November of last year. The price of Ethereum (ETH) briefly dropped below $950 on the decentralized exchange Uniswap overnight.
Bitcoin, the world’s most valuable cryptocurrency by market capitalization, fell below $21,000 per coin on Tuesday, falling nearly 70% from its peak price in November last year. At the time of reporting, the most popular cryptocurrency was hovering around $21,000, its lowest level in five years. Overall, the global crypto market cap fell below $1 trillion to $958 billion, a 6.15 percent drop in one day.
According to CoinMarketCap data, the market capitalization of cryptocurrencies fell below $1 trillion on Monday for the first time since February 2021. Since Saturday, the market has lost approximately $200 billion.
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The cryptocurrency market has recently seen sharp selling, mirroring the global equity market, after U.S. consumer inflation hit a 40-year high of 8.6 percent in May, raising fears that the Federal Reserve will raise interest rates aggressively, potentially leading to a recession. The market is speculating that the US Federal Reserve will raise interest rates again later this week, possibly by 0.75 percent.
Other popular digital currencies experienced a similar trend in the previous 24 hours of trading. Ethereum, the world’s second-largest cryptocurrency, was down 9% at $1,211.8, while Binance Coin and XRP were down 6% and 3.7 percent, respectively. Other digital coins, such as Dogecoin and Shiba Inu, were also under selling pressure, falling by 1-3 percent.
“Everything is on fire right now, be it the equities, be it the crypto assets or anything,” said Nirmal Ranga, head of trading and technical analysis at crypto exchange ZebPay.
On Monday, crypto-assets were hammered after crypto lending platform Celsius paused withdrawals, citing concerns about the company’s solvency, which could spread to other parts of the market.
Withdrawals, swaps, and transfers between accounts would be halted due to “extreme market conditions,” according to Celsius, and the move was intended to “stabilize liquidity and operations.”
The primary drivers of today’s bearish price action are rising global inflation rates and Fed rate hikes in the United States. The United States’ inflation rate has reached a 40-year high of 8.6 percent, but the country is not alone. Inflation is a global phenomenon, affecting all significant economies.
In May 2022, the inflation rate in European countries such as Germany (7.9 percent), France (5.25 percent), the Netherlands (8.8 percent), and the United Kingdom (9 percent) increased. Rising fuel costs and changing supply-chain dynamics as a result of Russia’s ongoing invasion of Ukraine are fueling global inflation.
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