Bitcoin Prices Fall Off A Cliff To Hit Lowest Since Late July—What Drove These Losses?
Bitcoin prices plunged today, falling to their lowest in more than three weeks as many digital currencies and major U.S. stock indices suffered losses.
The world’s most valuable cryptocurrency by market value registered a sharp drop earlier today, losing more than 5% of its value in under 30 minutes, TradingView figures show.
Following this abrupt decline, the digital asset continued to push lower, reaching an intra-day low of $20,876.80 around 7 p.m. EST, additional TradingView data reveals.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
At this point, bitcoin had fallen over 10% in approximately 24 hours, and it was down over 15% from its recent high of more than $25,000 reached on August 15, additional Trading data reveals.
When explaining the digital currency’s latest losses, market observers described an environment of risk-off trading activity, in which both cryptocurrencies and stocks suffered due to investors’ concerns about Federal Reserve policy.
Central bank officials have increased benchmark rates several times this year, and an environment of higher borrowing costs could provide headwinds for riskier assets like digital currencies.
The analysts who provided input for this article highlighted the recent communications of Fed officials, as many of them have been emphasizing the need to bring inflation under control.
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James Bullard, president of the St. Louis Fed and member of the Federal Open Market Committee, stated during a recent Wall Street Journal interview that he is thinking about supporting another significant increase in benchmark rates at the next policy meeting in September.
Central bank officials approved a 75 basis-point increase in July, after U.S. headline inflation figures reached their highest in 40 years the month before.
“We should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation,” he told the WSJ.
“I don’t really see why you want to drag out interest rate increases into next year,” Bullard added.
Mary Daly, president of the Federal Reserve Bank of San Francisco, also commented on the matter during a recent interview with Bloomberg TV, stating that she was open to backing a 75 basis-point increase at the next policy meeting.
Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management, emphasized the key role importance of such statements, noting that “investors are hanging on every word that the Fed is saying.”
He also spoke to how these developments probably caused market participants to sell their riskier assets.
“With the reiteration of commitment to lowering inflation this week, people likely took the opportunity to unwind their positions,” said Sifling.
Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, offered a similar take on the matter.
“The sharp decline today is a result of market participants reducing risk after renewed expectations of FED’s hawkish treatment.”
Going forward, investors’ intense scrutiny of central bank communications will continue, predicted Armando Aguilar, an independent cryptocurrency analyst.
“All eyes will be on the Fed’s annual symposium in Jackson Hole, WY next week,” he stated.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.