Ethereum and other major cryptocurrencies have tumbled this weekend, wiping more than $100 billion from the combined crypto market after US Treasury Secretary Janet Yellen issued a stark crypto warning.
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Bitcoin price has fallen to around $27,000 per bitcoin, its lowest price since late 2020, while Ethereum has plummeted below $1,500 per ether. Smaller cryptocurrencies perform even worse with BNBBNB
Solana, Cardano, XRPXRP
Dogecoin, Tron, and Avalanche all saw double-digit percentage declines over the past 24 hours.
The recent bitcoin and crypto sell-off was prompted by fears that the Federal Reserve might “step the gas” in its fight to bring down inflation, after the latest reading of the US CPI showed the economy is still red-hot .
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“The Federal Reserve is now backed into a corner,” crypto investor and influencer Anthony Pompliano wrote in his newsletter after the latest inflation data was released.
On Friday, data showed that US prices rose faster-than-expected in May, rising 8.6% after declining in April, fueled by rising energy and food costs and pushing inflation to its highest level since driven in 1981.
“Inflation has not abated despite the Fed raising rates and conducting quantitative tightening. You don’t have many options other than just stepping on the gas. The Fed may seek to accelerate rate hikes, both in speed and severity, along with accelerated quantitative tightening. I’m not sure they will, but there aren’t many other avenues to pursue.”
The Fed is expected to hike interest rates to between 1.25% and 1.50% next week, following a similar move last month. A Reuters Survey shows economists forecast another 50 basis point rate hike in July.
“[Friday’s] The inflation report is the last major release ahead of next Wednesday’s Fed meeting,” wrote Alex Kuptsikevich, senior market analyst at FxPro, in an emailed note Pressure on the Fed. Potentially, such a high reading could trigger a harder price [Fed] attitude in the accompanying commentary.”
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The bitcoin, ethereum, and crypto markets have fallen steadily over the past six months, crashing along with the stock market as the Federal Reserve and other central banks around the world hike interest rates and begin tapering pandemic-era stimulus measures . The Fed this month began the long process of shrinking its swollen $9 trillion balance sheet known as quantitative tightening.
“Bitcoin’s continued correlation with stock markets riddled by macro forces has stifled optimism and sparked frustration at a time when crypto seems to be missing the perfect opportunity to demonstrate its forgotten role as a hedge against inflation,” said Rich Blake, financial advisor at Crypto Platform Uphold, wrote in emailed comments.
“As monetary tightening accelerates around the world, equities are still vulnerable to lower lows in the near-term as they spot telltale signs of a cyclical bear market.”