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- The crypto market endured its second brutal sell-off this year, with bitcoin dramatically plunging.
- Bitcoin fell to its lowest since December 2020 to trade at $25,272 on Monday.
- The carnage comes against a backdrop of high inflation rates, and crypto regulation discussions.
Bitcoin dropped to its lowest in 18 months on Monday, as the cryptocurrency market endured a second major battering so far this year after US inflation data on Friday sent investor fleeing from risk assets, including equities.
Over the weekend, bitcoin plunged to its lowest since December 2020 to trade below $25,000 at one point on Monday, according to CoinMarketCap. The token is about 63% below the record high of $69,000 it reached last November. It was last at $24,066, down 12.45% over the past 24 hours.
Other tokens, including ether, cardano, solana, and dogecoin also collapsed. Ether, the second-biggest cryptocurrency, tanked 15.8% to trade at $1,234.93, set for its biggest one-day fall in a year, while while cardano and solana plummeted 13% and 16%, respectively. Meme coin dogecoin dropped 14%.
Ether’s drop came in tandem with a Friday announcement made by its core developers who decided to delay the implementation of the “difficulty bomb,” a catalyst in upgrading the ethereum network from a proof-of-work system to proof-of-stake as part of its big upcoming merge.
“Perhaps the biggest carnage has been in the crypto space which is on the verge of a reckoning now that the gloves are off around global inflation and the realities of a new world where fixed interest actually pays a yield – albeit one still deeply negative in real terms,” said Jeffrey Halley, senior market analyst of Asia Pacific at OANDA in a blog.
This second big rout of 2022 in the crypto market follows data that showed US consumer inflation rose 8.6% in the year through May, the highest rate since December 1981. The reading exceeded economist expectations for last month at 8.3% due to the soaring cost of energy and food.
High inflation rates in the US have prompted the Federal Reserve to step up its efforts to tame price pressures using more aggressive monetary policy.
The Fed’s policy-setting committee is expected to announce a half-point rate rise when it concludes its meeting on Wednesday, which would bring its benchmark rate to 1.5%. The central bank raised rates by half a point in May and markets show investors expect a string of hikes this year.
The current sell-off has wiped over a quarter of a billion dollars off the size of the entire crypto market, according to CoinMarketCap.
Last month, major tokens including bitcoin and ether endured intense sell-offs as investor anxiety built over the Fed’s easing of its ultra-easy policy and a high-profile collapse in algorithmic stablecoin TerraUSD. The crypto market as a whole had lost $500 billion in value as a result of the collapse.
Meanwhile, crypto lender Celsius said on Sunday it would pause withdrawals alongside its swap and transfer products, citing “extreme market conditions.”
“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations,” the company said in a blog post.
The announcement triggered a 54% drop in its Celsius (CEL) token, per CoinMarketCap.
Treasury Secretary Janet Yellen last week called for tighter regulation of the crypto industry. She said cryptocurrencies were a “very risky investment,” at a Thursday event organized by the New York Times adding that Congress could regulate what assets could be included in retirement plans, per Bloomberg.
“I’m not saying I recommend it, but that to my mind would be a reasonable thing,” Yellen said on whether Congress should impose the rules.
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