SINGAPORE — The world’s largest cryptocurrency, bitcoin, continued its downward trajectory this year, falling below $ 26,000 in the midst of a wider selloff fueled by worries about rising US interest rates.
Over the weekend, digital currencies plunged, and they fell even more on Monday morning in Asia as a new inflation shock increased investors’ concerns that the Federal Reserve could need to take more drastic action to contain rising prices.
A well-known lender to the sector stopped allowing customers to withdraw funds as turmoil erupted in the cryptocurrency market. Due to “extreme market conditions,” Celsius Network LLC stated it was halting all withdrawals, cryptocurrency swaps, and account transfers.
Consumer price inflation in the US increased to 8.6% in May, above predictions and reaching its highest level in more than 40 years, according to data released on Friday.
The data contributed to a Friday decline in the US stock market, which on Monday expanded to Asian share indices.
Monday morning in Hong Kong, the price of one bitcoin was $25,588. That was 9.6% lower than where it was at 5 p.m. ET on Friday. The lowest end-of-day level since December 2020 would be reached if that level holds through New York trading hours.
Another significant cryptocurrency, Ethereum, dropped to approximately $1,357, or nearly 19%, from late Friday.
In recent weeks, cryptocurrency prices have moved in lockstep with traditional markets, often mirroring other risky assets like equities, but with increased volatility.
The first cryptocurrencies to be traded in a market selloff are typically risky and extremely liquid, according to Jeff Mei, chief marketing officer at chain technology solutions company ChainUp.
According to Markus Thielen, a chief investment officer of IDEG Asset Management Ltd., the market has started to take Federal Reserve Chairman Jerome Powell’s remarks from last month “at face value when he said… the Fed must move more aggressively if there are no clear signs that inflation is coming down.”
The public’s forecast of inflation in the next five years increased to 3.3% from 3% in May, the highest level since 2008, according to the generally regarded University of Michigan consumer sentiment poll.
According to him, “the public is losing faith that the US central bank will be able to drive inflation lower.” For cryptocurrencies to once again be highly appealing, a change in Fed policy is probably necessary, Mr. Thielen continued.
From its all-time high in November, when it reached $ 67,802, Bitcoin has now dropped by more than 60%. This has caused the overall market to lose close to $ 2 trillion. According to data from CoinMarketCap, the overall market value of cryptocurrency, which peaked in November at $ 2,968 trillion, was $ 1,031 trillion on Monday.
The most recent decline in cryptocurrency prices also followed Treasury Secretary Janet Yellen’s assertion last week that cryptocurrencies are a very dangerous investment for the majority of retirement savers.