15th June 2022 – (Washington) The largest cryptocurrency by market capitalisation dropped further on Tuesday as crypto industry layoffs widened and traders fretted over a likely steeper-than-expected rate hike by the U.S. central bank.
Down for the eighth consecutive day, bitcoin regained little strength after falling to a 30-month low of US$20,834.50 on Monday night but was still down over 5% over the past 24 hours.
The 15% price drop at the start of the week was the biggest since the crash prompted by COVID-19 on 12th March, 2020.
Not just bitcoin, but cryptocurrencies of all market cap sizes have suffered in the current sell-off, tracking steep declines in stocks, as Arcane Research noted in a report Tuesday.
“We’re coming off of about a decade of monetary stimulus and money supply has grown rapidly, and for the first time market participants are getting the punch bowl taken away from them,” said Fundstrat Global Advisors head of digital asset strategy Sean Farrell on CoinDesk TV. “I think we’re still going to need to see inflation start to roll over before we can be confident in any run to the upside and relief to the upside.”
An article in The Wall Street Journal on Monday hinted at a 75 basis point rate hike by the Fed at the conclusion of its two-day, closed-door meeting Wednesday.
This leaves traders fearing monetary tightening throughout the year with no break, as Atlanta Fed President Raphael Bostic suggested earlier this month, temporarily buoying crypto markets. Economists at Goldman Sachs (GS) now are forecasting 75 basis point rate hikes for both June and July, followed by a 50 basis point increase in September plus a 25 basis point hike in November and in December.
“Investors should be braced for volatility and sticky correlations at least in the coming days,” Arcane researchers wrote.
As a result, the bitcoin Fear and Greed Index reached 8, signaling extreme fear. While the market has been in extreme fear territory for the 56th consecutive month, this level hasn’t been seen since March 2020.