Crypto drops as investors weigh on lingering inflation and rate hikes

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Bitcoin has been closely correlated with stock indices, particularly the Nasdaq, which rose on Wednesday after the US Federal Reserve raised interest rates by 0.75 percentage points. This is one of the reasons bitcoin rose slightly on Thursday.

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Bitcoin slid towards $29,000 on Wednesday as traders pondered the likelihood of Federal Reserve rate cuts being further away than they thought.

The price of bitcoin last fell around 3% and traded at $29,202.54, while ether fell 5% to $1,977.28.

The drop comes after Ether rose 12% over the past week and broke above $2,000 for the first time since August. This helped push bitcoin up 8% above the $30,000 mark.

“We believe the pullback we are seeing is more a function of a late correction following impressive moves and possible profit taking on a broader risk stream in global markets than anything specific to crypto. “, said Joel Kruger, market strategist at LMAX Group.

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Bitcoin drops on UK inflation data

On Wednesday morning, investors took notice of new UK inflation data, which showed consumer prices unexpectedly held above 10% in March. This fueled expectations that the Bank of England could raise rates by 25 basis points at its May meeting.

Meanwhile in the United States, Atlanta Federal Reserve Chairman Raphael Bostic said on Tuesday he expects another 25 basis point interest rate hike and then a hold “for a while.” “. Bostic spoke to CNBC’s “Squawk on the Street.”

“There have been signs that the Fed may be more aggressive towards higher interest rate policy than the market is pricing, which has led to yield spreads in favor of the US dollar, while weighing on the feeling,” Kruger said.

Market participants were expecting a pullback in crypto prices this week as investors turned their attention away from Ethereum’s latest technical upgrade and the potential the Fed could push the economy into a recession. with its rate hikes reportedly giving bitcoin a new proving ground at a time as investors get to grips with the diverse potential of the crypto asset.

Clara Medalie, head of research at crypto data provider Kaiko, noted that liquidity in the crypto market remains weak after the United States lost two of its largest fiat-crypto on-ramps in the banking crisis earlier this year, networks provided by Silvergate and Signature Bank.

“Overall, both upside and downside volatility can be expected due to a prolonged period of low liquidity in the crypto markets, which has particularly affected bitcoin and Bitcoin. ether,” she said. “A crypto rally is hard to trust with the state of market liquidity, so a sharp drop to the downside is hardly a surprise.”

Traders were also digesting Tuesday’s contentious congressional hearing with Securities and Exchange Commission Chairman Gary Gensler, who defended his agency’s crackdown on cryptocurrency trading platforms and did not provide a response. clear as to whether ether is a title. Gensler has long argued that all crypto assets other than bitcoin should be considered securities.

Investors are watching another congressional hearing on Wednesday, this time on the House Financial Services Committee’s stablecoin bill.

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