Cryptocurrencies suffer sharp selloff amid fears interest rates will keep rising
Cryptocurrencies suffered a sharp selloff as global markets retreated after US Federal Reserve officials reiterated their resolve to keep raising interest rates until inflation is contained.
Bitcoin, the largest virtual coin by market capitalisation, tumbled as much as 9% to $21,271, the biggest intraday drop since June 18. Ether and smaller tokens saw even sharper declines, with Avalanche, Cardano and Solana falling more than 10%.
Digital assets are getting punished as investors unwind bets that the Fed might raise interest rates less than initially feared.
Optimism about more favourable liquidity conditions drove a more than 40% rally in Bitcoin since June’s crypto market crash, while Ether more than doubled at one point.
A big chunk of the day’s losses came all at once during Asia trading, when Bitcoin lost almost 5% of its value against the dollar in roughly a minute at one stage on Friday.
Such mini-crashes are rare but not unheard of in online currencies, where futures transactions often dominate price action and are subject to near-instantaneous liquidations by automated
About $220m (€219m)of crypto positions got liquidated in the span of an hour on Friday, with Bitcoin accounting for roughly half of that, according to data from Coinglass.
“Bitcoin is a speculative asset and speculative assets don’t do well during tightening regimes, when the central bank is tightening and liquidity is becoming more scarce,” Jose Torres, senior economist at Interactive Brokers, said.
