The cryptocurrency market is overtaken by investors’ worries about the health of the economy and what the Fed will do.
Uncertainty is back in the cryptocurrency market after more than three weeks of calm marked by the rebound in prices.
Bitcoin, the king of cryptocurrencies, even managed on August 15 to once again reach the symbolic threshold of $25,000. It was the first time the largest digital currency traded around $25,000 since June before falling back.
But since then, the 25,000 dollars now look like a feat, as bitcoin is suffering again. The king of cryptocurrencies is down 10% over the past seven days. But the most worrying for investors is that the drop is more than 8% in the last 24 hours. Bitcoin is currently trading at $21,527.39, according to data firm CoinGecko.
Altcoins, or other coins other than bitcoin, are also down starting with ether, the native currency of the very promising Ethereum platform. Ether is down more than 7% at $1,722.81 in the past 24 hours.
The second cryptocurrency, had risen sharply in recent days because we are getting closer to the long-awaited update of the Ethereum software which would make transactions more fluid, lower transaction fees and considerably lower the energy consumption linked to the validation of operations. This update, known as the Merge, is scheduled for September 15.
Crypto Has Lost Over $170 Billion in the Last 24 Hours
Coins related to widely followed decentralized finance (DeFi) platforms, which allow developers to work on projects related to financial services and others, were in very sharp decline: solana (-12%), cardano (-13.9% ), polkadot (-11.5%).
The meme coins dogecoin (-14.1%) and shiba Inu (-12.4%) coins were not spared.
Overall, the crypto market has lost more than 8% in the last 24 hours, or just over $170 billion. It is currently worth $1.08 trillion compared to just over $3 trillion during cryptomania last November.
This drop in cryptocurrency prices looks more like a correction after weeks of rebounding than an actual panic. It is in line with the pullback from equity markets as investors’ attention turns to Jackson Hole, Wyoming, where the traditional annual Federal Reserve symposium is being held next week.
Investors are in the dark about the intentions of the central bank in relation to its monetary policy. Will the Fed maintain its aggressive pace of rate hikes or will it slow down somewhat? Members of the Fed (James Bullard and Esther George) have sent divergent signals in recent days.
An aggressive rate hike is likely to cause a hard landing in the economy, some experts fear. This scenario is particularly devastating for risky assets like cryptocurrencies.
Investors are therefore hanging on to comments from the Fed. In the meantime, the nervousness seems to be back as in May and June.