Crypto markets experienced somewhat of a shake-up following two weeks of stagnancy, as concerns over UK inflation and Janet Yellen‘s recent warning on the U.S. debt ceiling stalemate sent prices spiraling on Wednesday. Investor confidence further dwindled with the Federal Open Market Committee (FOMC) minutes revealing U.S. central bankers divided on continuing interest rate hikes.
Bitcoin (BTC), trading at approximately $26,440, experienced a drop of about 3% within 24 hours, reaching levels not seen since May 12 when the cryptocurrency dipped below $26,000. BTC’s volatility and trading volume have been relatively low during this period, as markets grapple with the looming threat of a U.S. government unable to pay its debts, as well as crypto regulatory and macroeconomic uncertainties. Until Wednesday, Bitcoin had remained within a $26,500 to $27,500 range.
Ruslan Lienkha, chief of markets at fintech platform YouHodler, comments on the increased tension in financial markets impacting both equities and digital assets. He adds, “US stock indexes are under selling pressure by raised concerns about a possible default of the US.” Lienkha believes that the looming uncertainty has led to financial institutions restructuring assets and preparing for a possible default, placing pressure on financial market participants.
Ether suffered similarly, recently trading at around $1,808, showcasing a drop of roughly 2.6%. Most major cryptocurrencies experienced declines on Wednesday, with LTC and SOL falling by more than 5.2% and 3.6%, respectively. The CoinDesk Market Index, a measure of crypto markets performance, fell 2.8%. The CoinDesk Bitcoin Trend Indicator remains in downtrend territory, reflecting the decline in investor optimism. Analysts predict that Bitcoin will likely remain stagnant until a new influential factor enters the picture.
Major stock indexes suffered on Wednesday as well, demonstrating the correlation between equity and crypto pricing. The tech-focused Nasdaq, S&P 500, and Dow Jones Industrial Average (DJIA) all experienced declines of nearly one percentage point. The recent warning by Yellen, stating that the U.S. could “run out of money” without a debt limit agreement, appears to have affected all assets.
Crypto prices took a plunge earlier on Wednesday after the UK’s latest Consumer Price Index (CPI) reached 6.8% in April, surpassing the expected 6.2% and marking its highest point since 1992. The dismal CPI results indicate that England’s central bank will likely continue its recent series of interest rate hikes, which have generally discouraged crypto markets.
In a CoinDesk TV interview, Glen Goodman, author of “The Crypto Trader,” noted Bitcoin’s recent connection to the price of gold, a traditional safe-haven asset. However, according to Goodman, BTC still lacks a consistent motivation to determine investor buying and selling decisions. “We still haven’t found a reason why everybody needs to have a goal […]. We’re waiting for events, for some kind of disaster to befall the world economy, such as the dollar collapsing. And then, of course, everybody would coalesce around one narrative.”
Source: Coindesk
