Rising inflation in US and UK drives crypto sell-off

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Bitcoin fell about 4%. Photo: Reuters

Cryptocurrencies were largely down on Wednesday morning as rising inflation in the US and UK fuels the view that central banks will soon have to raise interest rates.

Bitcoin (BTC-USD) fell 3.8% to $ 31,894 (23,041), losing the gains it made a month ago, when it hit a high of $ 41,330 on the 15th. June. It is still a long way from its historic high of $ 63,000, which it reached in April of this year.

Ethereum (ETH-USD) fell 6.7% to $ 1,883, while the Dogecoin joke token (DOGE-USD) fell 6.6% to $ 0.19.

Cryptos have already been hit hard by global regulatory action. Now it looks like the sell-off was triggered by inflation: US inflation hit a 13-year high in June, driven by a rise in the cost of used cars, with consumer prices rising by 5, 4% over one year.

Inflation has risen as economies ease foreclosure restrictions. In the UK, inflation jumped to 2.5% in June, the highest figure since August 2018 and beating economists’ forecasts.

It also exceeded the Bank of England’s target of 2%. Earlier, the outgoing chief economist of banks warned that inflation could climb to 4% by December.

Bitcoin fell on Wednesday morning. Chart: Yahoo Finance France

The central banks of both countries are now likely to consider whether to raise interest rates, a tool often used to keep inflation from spiraling out of control.

The bears hijacked the stock markets yesterday after the release of inflation data that released numbers higher than economists expected, said Naeem Aslam, chief market analyst at Ava Trade.

He said bitcoin collapsed as a result of this frenzy in the financial markets.

But he reiterated a point he has repeatedly made over the past two months, namely that crypto enthusiasts take every opportunity to get a good deal as institutional investors continue to pour money into the market. this space.

The latest example is the entry into the market of Capital Group, one of the world’s largest investment management firms.

He acquired a 12.2% stake in MicroStrategy (MSTR), which is heavily invested in Bitcoin and has bought Bitcoins for $ 2.74 billion since the end of June.

The story continues

Read more: Sterling spikes as inflation increases pressure on BoE to raise rates

As a result of this transaction, Capital Group gained indirect exposure to digital assets, reassuring investors that the crypto industry has a bright future, Aslam said.

Earlier this week, the Metropolitan Police’s Economic Crime Command seized nearly 180 million Bitcoins following an international money laundering investigation. The Met also confiscated 114 million cryptocurrency last month.

Cryptocurrencies have come under heavy pressure for regulation from global governments to central banks, with several countries imposing measures to regulate digital tokens.

Watch: What are the risks of investing in cryptocurrency?

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