HONG KONG — The bitcoin market has plunged this year, with the world’s largest cryptocurrency falling below $26,000 amid a broader sell-off fueled by concerns about rising U.S. interest rates.
Digital currencies fell over the weekend and continued to fall on Monday morning in Asia, after Inflation shock increases investor fear that the Federal Reserve may be forced to act more aggressively to rein in rising prices.
As chaos ensued in the crypto market, a widely used lender in the industry froze customer withdrawals. C Network LLC says it has suspend all withdrawalsswaps between cryptocurrencies and transfers between accounts “due to extreme market conditions.”
Friday’s data showed US consumer price inflation stood at 8.6% in May, beating estimates, reached its highest level for more than four decades.
The figures helped propel the US stock market lower on Friday, which spread to Asian stock indices in Monday.
In the early afternoon in Hong Kong on Monday, bitcoin was trading at $25,588. That was down 9.6% from 5pm ET on Friday. If that level holds throughout New York trading hours, it would mark the lowest end of the day since December 2020.
Ethereum, another major cryptocurrency, has dropped to around $1,357, down about 19% from Friday’s end.
Cryptocurrencies have moved in tandem with traditional markets in recent weeks, with a tendency to echo other risk assets like equities, albeit with even higher volatility.
“High-liquidity and risky cryptocurrencies are often sold first during a market sell-off,” said Jeff Mei, chief marketing officer at blockchain technology solutions provider ChainUp.
The market has already begun to take comments from Federal Reserve Chairman Jerome Powell last month “at face value when he said… Fed must move stronger Markus Thielen, chief investment officer at IDEG Asset Management Ltd., said there are no clear signs that inflation is slowing.
Mr. Thielen pointed to the University of Michigan’s widely watched consumer sentiment survey, shows the public’s expectations for inflation Five years from now has increased to 3.3% from 3% in May, the highest level since 2008.
“The public is losing confidence that the US central bank will be able to push inflation lower,” he said. It may take a change in Fed policy for cryptocurrencies to become very attractive again, Thielen added.
Bitcoin is now down more than 60% from its all-time high in November, when it hit $67,802. That contributed to the write-off of nearly $2 trillion in the broader market. The total market capitalization of cryptocurrencies, which peaked in November at $2.968 trillion, stood at $1.031 trillion during Asian hours on Monday, data from CoinMarketCap showed.
The most recent crypto drop also comes after Treasury Secretary Janet Yellen last week called cryptocurrencies a very risky investment for most retirees savers.
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