Crypto market crashes towards yearly lows after interest rate hike
Cryptocurrency market loses nearly $100 billion in value over the last seven days despite Ethereum Merge success
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Your support makes all the difference.Bitcoin and the broader crypto market have slumped close to yearly price lows on Thursday following a move by the US Federal Reserve to raise interest rates to their highest level in almost 15 years.
The interest rate hike was widely expected, meaning the cryptocurrency market downturn was not as bad as some analysts feared, though the Bank of England is also anticipated to raise rates on Thursday.
The rate rises come in response to high inflation levels, with some projections by Federal Reserve officials estimating that they may continue into next year. This would likely have a negative impact on the price of cryptocurrencies, as well as the stock market, as people and companies tend to borrow and invest less and save more.
“Raising rates is negative for crypto because it means that it becomes more expensive to borrow because loan payments are larger and so it entices people to save more,” Marcus Sotiriou, an analyst at the digital asset broker GlobalBlock, told The Independent.
“In addition to the Federal Reserve decision, there is the Bank of Japan monetary decision and Bank of England interest rate decision on Thursday, as well as the US Conference Board leading index. We are therefore set up for a very volatile week as investors gain clarity on the decisions of central banks.”
The overall crypto market is down by nearly $100 billion over the last seven days, falling below $900 billion for the first time since July.
There was a brief bounce last week after Ethereum, the world’s second most valuable cryptocurrency behind bitcoin, successfully completed its long-awaited Merge, which slashed its energy consumption by more than 99 per cent.
However, any hopes for sustained gains did not transpire, with Ethereum’s token ether (ETH) down nearly 20 per cent over the last week.
Further interest rate rises will likely see more crypto market turmoil in the short term, though some analysts remain hopeful that the trajectory will be more positive over the long term.
“Despite the tumultuous market conditions, traditional finance institutions continue to enter the space, as the Nasdaq, the second biggest American stock exchange by market cap, is launching a digital assets business that is targeted at institutional investors,” Mr Sotiriou said.
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