Today’s slump in the price of crypto giants including Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE) has left investors disappointed. At the press time, BTC was trading at $23,379.13, down by 4.05% over the last 24 hours. Meanwhile, the price of ETH and DOGE was spotted trading at $1,845.20 and $0.082021, a decline of 5.11% and 6.78% respectively.
Is Wall Street affecting crypto market?
So, what has led to this bearish trading pattern in the crypto biggies? One answer to this is the dismal performance of US indices in the overnight trading on Wall Street as hawkish investors keenly watched the minutes of the July meeting published by the Federal Reserve on Wednesday. With inflation still in sight, investors are sceptical if the US Central Bank will further hike the interest rates or if there will be a relief.
It is to be noted that investors are stuck between comments made by Fed officials projecting further tightening of the monetary policy and market-based predictions which expect the Federal Reserve to slow or reverse its rate hikes.
US indices close lower over anticipation of Fed hike
On Wednesday, the S&P 500 closed 0.72% lower at 4,274.04 points, the Dow Jones was down 0.5% at 33,980.32 points, while the tech-heavy NASDAQ Composite settled 1.25% lower at 12,938.12 points.
It seems the three crypto tokens are tracking the price movement of the global equities. Meanwhile, U.S. Treasury yields gained on Wednesday as there were fresh concerns over an increase in the interest rates. It is noteworthy to mention that a rise in bond yields usually impacts risky assets, this includes major cryptocurrencies.
Interest rates rise investors shift from high-risk assets to low-risk assets
The crypto market is very volatile and investment in digital assets is considered riskier as one cannot predict what will happen the next moment. As of now, traders have adopted a precautionary approach given the current market uncertainty which largely depends on the action taken by the Federal Reserve to tame inflation.
Increased interest rates mean a lower appetite for high-risk assets like cryptocurrencies. Past precedents show that a relaxation in the monetary policy mandate by the Fed following the Coronavirus pandemic fueled a bullish trend in the crypto market through the end of 2021.
In the current scenario, it appears that hawkish investors are shifting away from higher-risk assets for the time being and are in a wait-and-watch situation awaiting additional clarity on rate hikes by the central bank.
According to CoinGecko, the global cryptocurrency market capitalisation is $1.17 Trillion as of today. It registered a drop of 4.14% in the past 24 hours. While a decrease of 41.19% has been recorded over the past year.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.