Bitcoin 7-day price chart. Source: CoinMarketCap
As a result, not only has Bitcoin gone from trading above $31,300 in the last week, but it has also seen the flagship digital asset lose almost $130 billion from its market cap.
Given that Bitcoin is the largest asset by market capitalisation in the cryptocurrency space, its price movements have a major effect on the rest of the market and its sentiment.
Despite this, Bitcoin has been known to experience numerous cycles in the past, and each time it has been able to recover strongly after falling. In fact, during the course of history, 100% of investors who waited at least four years after making their purchase saw their initial investment rise.
Global recession fears
Fears of a global economic slowdown are putting pressure on the cryptocurrency market, which may encourage investors to avoid more risky trades.
Over the course of the last day and a half, the value of Dogecoin, Cardano, and Solana have all dropped by more than 10t. At the time of publication, the price of Ethereum has fallen below $1,300, marking a decline of 75% from the cryptocurrency’s all-time high, which was reached in November 2021 at around $4,900.
In recent months, traditional equities markets and the cryptocurrency market have become more connected with one another. The value of cryptocurrencies has decreased along with the S&P 500, which went down by 2.9% on Friday, June 10 and the Nasdaq, which went down by 3.5%.
Fed rate hike
A two-day meeting of the Federal Reserve is scheduled for the following week, and it is widely anticipated that interest rates would be increased even more at that meeting. Also, Treasury Secretary Janet Yellen added to the pessimistic view by expressing concern over incorporating cryptocurrencies into 401(k) plans.
The initial projections of the interest rate rise projected a 50 basis point increase; however, fresh information from the recently issued consumer price index data has generated worries that the Federal Reserve may take more aggressive action, which would pave the road for a recession.
Finally, inflation reached an all-time high of 8.6% in May, a figure that has not been seen since 1981; thanks to external factors such as the skyrocketing costs of energy and food, time will tell if Bitcoin can revert to becoming the hedge against inflation in the coming weeks as many had anticipated.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.