Bitcoin & Co: Devaluation due to record inflation in the US and fear of high interest rates

Fears of an acceleration of the US interest rate turnaround following surprisingly high inflation continues to weigh on the performance of Bitcoin and other digital currencies. On Sunday afternoon, a bitcoin cost $ 27,464 on the Bitstamp trading platform, three percent less than the day before. Since inflation data in the United States became known on Friday, the oldest and largest cryptocurrency has already lost a full nine percent. The price is therefore slipping further to its lowest level since late 2020, which had marked around $ 25,400 in mid-May. Other crypto assets such as number two on the market, Ethereum, have also continued to come under pressure in recent days.

In the United States, the already high inflation rate surprisingly continued to rise in May to the highest level in 40 years: consumer prices rose 8.6 percent from the same month last year. This has dealt another blow to the mood in the financial markets, which are already shaky due to concerns about the economy. On the stock market, Germany’s leading Dax index tumbled more than three percent on Friday, and Wall Street also fell significantly.

Investors fear that high inflation rates in many regions of the world will soon dampen people’s spending mood as they simply have to spend more money on groceries, electricity and rent. Furthermore, a tough stance by the US Federal Reserve to curb inflation could become an additional brake, as high interest rates are likely to make companies and consumers more reluctant to invest and spend on leverage.

However, yields on the bond markets continue to rise. On Friday, for example, the yield on US 10-year Treasuries hit its highest level since late 2018. In turn, rising interest rates often push down the prices of risky assets such as digital currencies.

Up until November last year, digital currencies were still growing despite already high inflation. At the time, some market watchers saw Bitcoin and other cryptocurrencies as a protection against a devaluation of classic currencies such as the dollar, despite extremely strong fluctuations. The picture has now completely changed. Since hitting a record high of $ 69,000 in November, bitcoin has plummeted a whopping 60%. According to Coinmarketcap, it now only has a market value of $ 524 billion, followed by Ethereum at $ 178 billion.


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