Cryptocurrencies under pressure
Inflation fears continue to drive bitcoin to the downside
Up until last November, digital currencies were still on the rise despite an already high inflation rate. Now it has completely changed. Fears of inflation and interest rates are putting bitcoin to the test. The latest data from the United States have plunged the price.
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. A bitcoin in the afternoon cost 27,464 US dollars on the Bitstamp trading platform, a good 3 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 market number two, Etherum, have also continued to come under pressure in the past few 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 a further blow to the mood of the financial markets, already weakened by 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 & Co as a hedge against a devaluation of classic currencies such as the dollar, despite extremely strong swings. 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 Etherum at $ 178 billion.