Why Is Crypto Down Today? Fed’s Comments Stunt Recovering Crypto Market.

  • The crypto market is having trouble building steam, thanks to Federal Reserve chair Jerome Powell’s recent comments
  • Powell recently suggested continued pressure on the market, spooking investors
  • After the comments, top cryptos like Bitcoin (BTC-USD) and Ethereum (ETH-USD) are dipping in price
A detail shot of the Federal Reserve building.
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The crypto market is only just getting back on its feet, but it’s already seeing new reasons for volatility. Today, the Federal Reserve seems to be to blame. Specifically, Fed Chair Jerome Powell made comments on the state of the economy. Now, crypto investors are hearing reason to believe there are more bearish catalysts ahead.

Yesterday, the crypto market at-large only just began to stabilize after a week of wild turbulence. Layer-1 decentralized app (dapp) network Terra (LUNA-USD) set the tone for this bearish downturn after its rapid decline to nearly $0. This storyline raised serious doubts for investors, for a number of reasons.

Perhaps most shocking is the sheer size of the project when it crashed; LUNA was one of the ten largest coins in the entire world by market capitalization. Now, it’s not among even the top 200. Seeing a crypto of such magnitude fall with no prior notice is sure to cause concern. But the project’s crash has also caused unease around stablecoins.

Terra’s collapse was prompted by its native TerraUSD (UST-USD) stablecoin losing its $1 peg. Stablecoins and top 10 cryptos had previously been thought of as some of the safest investments in the asset class. Now, their refuge isn’t guaranteed.

This crash led Bitcoin prices to drop beneath $30,000 once again. BTC stayed there for several days. After climbing past the $30,000 mark late last week, the coin had seemed to be holding on. Today, though, Bitcoin is slipping right back down.

Why Is Crypto Down Today? Bitcoin Dips Below $30,000 Again After Fed Comments

It looks like Bitcoin is going to have a harder time staying above $30,000 than investors had previously thought. One catalyst is cropping up almost as soon as the market puts another one behind it. So, with cryptos now by-and-large shrugging off the Terra news, why is crypto down today? Jerome Powell’s recent pledge to keep fighting inflation.

Yesterday, Fed chairman Jerome Powell said in an interview that the Fed will continue to mount pressure on the economy in the fight against inflation. “We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down,” Powell said.

These comments come at a time when the Fed is having a demonstrable effect on both the crypto and stock markets. The central bank has already implemented two different interest rate hikes to attack rising inflation; this comes after it began tapering on its aggressive spending campaign from 2020. At that time, the market was much kinder to speculative investments like crypto.

With the rate hikes, the market has seen a slump. Now, given that Powell is doubling down on the hikes, his comments seem to be a primary contributor to today’s declines. Bitcoin is trading down by about 3% today, as is Ethereum. Altcoins Solana (SOL-USD), Ripple (XRP-USD), Polkadot (DOT-USD) and Avalanche (AVAX-USD) are all also trading down by at least 4%.

On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.


Article printed from InvestorPlace Media, https://investorplace.com/2022/05/why-is-crypto-down-today-feds-comments-stunt-recovering-crypto-market/.

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