High inflation and rising interest rates are making digital currencies like Bitcoin increasingly difficult. At the start of the week, the price of the oldest and best-known cryptosystem fell to its lowest level in a year and a half. On the Bitstamp trading platform, a bitcoin cost about $24,300 (22,972 euros) at its lowest point, the lowest since December 2020. Before the weekend, about $30,000 was still paid for one bitcoin.
Not only Bitcoin, the largest internet currency by market value, but also other digital stocks were under considerable pressure on Monday. Ethereum, the number two crypto market, fell to $1,226. This is the lowest level since early 2021. The market value of all approximately 19,800 internet currencies sometimes fell below a trillion dollars. Last November’s record is about three times higher at nearly $3 trillion.
Rising interest rates are dragging the crypto market down
The main reason for the recent price decline is the rising capital market interest rates worldwide. The returns reflect the course of a much tighter monetary policy by many central banks. Markets were recently encouraged by higher-than-expected inflation data from the US last Friday, marking a 40-year high. The European Central Bank (ECB) also boosted interest rates last week, which many analysts say surprisingly announced that interest rates would be hiked in the near future.
Crypto assets suffer from the development in two ways. On the one hand, they are considered highly uncertain financial investments, as they usually fluctuate greatly in price. As the general market environment is also currently clouding significantly with rising interest rates, digital stocks have been particularly hard hit by the poorer mood. In addition, cryptocurrencies do not generate ongoing income. If the interest rate on fixed-income securities rises, this disadvantage becomes greater, which depresses prices.
Problems at cryptocurrency lender Celsius Network
Crypto expert Timo Emden of Emden Research cites problems at cryptocurrency lender Celsius Network as an additional reason for the sharp price drop. The provider had suspended withdrawals and transfers for the time being. Celsius belongs to the field of so-called decentralized financial services, a fast-rising branch of the crypto scene. Here, for example, transactions are processed using blockchain technology without the involvement of traditional financial institutions such as banks. Market participants were reminded a few weeks ago of the problems with the stablecoin TerraUSD, which had also caused a decline in the crypto market.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
