- Today, both Bitcoin and Ethereum have fallen sharply.
- Once again, there is a close correlation to the US stock market, which also started poorly.
- The reason is likely to be the latest figures on inflation, because it is recording a new record.
Inflation reached a new record in the US in May 2022 and it seems that this has caught up with the stock markets. Bitcoin and Ethereum also could not escape this effect and are recording losses. In the last 24 hours, BTC has lost around 13%, while ETH looks much worse and the price has lost almost 18% in the same time.
The reason is likely to be the expectation of many investors that the Fed is now taking a much tighter approach to inflation. This has recently been called for by various voices, but so far it looked as if the Fed would act gradually instead of suddenly when raising interest rates. In view of the new negative record, a rate increase of 75 basis points is now being discussed in the media.
Overall, a recession is more likely, if you can not even talk about the beginning. The ECB is also adjusting to the conditions and stopped buying bonds, raising the key rate by 25 basis points. At the same time, all central banks are under immense pressure, because the adjustments, in turn, have a negative impact on economic growth. So no matter which direction you go, it remains tricky.
The market is bleeding
Last week we were able to speculate on a bear market rally. However, both attempts by the bulls to climb the $ 32,000 mark were more than weak. Due to the fact that the two largest cryptocurrencies have gone on a dive, it also hits the rest of the market hard.
Many investors are surprised by the rapid price collapse of many assets. Many coins and tokens can claim to have a use case, but users usually cannot show it or only to a small extent. If you look at past market cycles, it is almost typical that the altcoin bubble is much larger and, accordingly, there is still a lot of downward air.
With the Fed holding another FOMC meeting as early as this week, it is likely to decide in the coming days whether the market will plunge into an even deeper crisis or take a little rest.
Possible bottoming at $20,000
A bottom formation seems to be particularly in the area around the 20,000 US dollars. The high of 2017 initially proved to be resistance in December 2020, which could now theoretically serve as support in alternation.
However, one cannot give guarantees on this, because currently the market is absolutely dominated by the inflation chaos. Interestingly, in this situation, Bitcoin can not establish itself as a successful hedge, but goes hand in hand with bathing tech stocks.
So a change of direction only seems more likely when the Fed finally relaxes its policy.
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