The Current State of Cryptocurrency

The year for crypto investors worsened in June as the broad market’s rotation out of risky assets continued. Bitcoin, Ethereum, and other digital assets took a hit.

Rising interest rates and concerns about the US economy have triggered a sell-off in various risk assets such as tech stocks, growth stocks, and cryptos in 2022. Many investors are worried that the Federal Reserve will be unable to avoid a recession as it continues to tighten monetary policy.

The Fed raised its key interest rate by 75 basis points in June. It was the most significant increase in the rate range in almost three decades. After the meeting, Jerome Powell, the chairman of the Fed, indicated that the central bank could raise the rate by another 50 to 75 basis points in July.

What Caused the Fall?

The rising interest rates and concerns about the US economy have affected various asset classes, such as stocks and bonds. Consumer prices are rising at the fastest pace in over four decades. The Federal Reserve is aggressively raising interest rates to bring down inflation.

The Fed raised its key interest rate by a quarter of a percentage point on Thursday. It indicated that it could increase the rate by another 50 to 75 basis points in July.

The rising interest rates have raised borrowing costs for people and companies. It’s also raising concerns about a potential recession.

The S&P 500 index has dropped more than 20% from its record high set in January. It entered a bear market this week, which means that it has fallen 20% from its recent high.

Although cryptocurrencies have not been immune to the decline in the market, they are still down significantly from their highs. Since Bitcoin hit an all-time high in November, its value has dropped by around 70%. Other digital assets such as Dogecoin are also taking a hit.

Bitcoin’s supporters have always claimed that the digital currency would be an inflation hedge. However, it hasn’t behaved that way. As the value of Bitcoin has dropped, the value of tech stocks has also taken a hit.

June Performance Metrics

Bitcoin prices dropped by 38% in June. It ended the month at around $20,000. On the other hand, Ethereum prices fell by 42% month-over-month to about $1,100. This is because the network is preparing to transition from its current proof of work consensus model to a more energy-efficient one. Over the past year, Bitcoin has lost 60%, and Ethereum is down more than 50%.

Among the other popular altcoins, Avalanche, Dogecoin, and Polkadot were also down by more than 25% in June. The total market capitalization of cryptocurrencies peaked at around $3 trillion in November 2021. It’s currently around $866 billion, with around $2 trillion wiped out.


This post was originally published on Etienne Kiss-Borlase’s Finance Blog. For more info about Etienne, please visit his homepage.

The Current State of Cryptocurrency

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