Why have cryptocurrency prices fallen?
Cryptocurrency prices have suffered significant falls in recent days, influenced by the increase in interest rates by the US Federal Reserve and the high inflation that is shaking that country.
On the one hand, the Fed approved a 50 basis point increase in interest rates at its May meeting, to a range of 0.50% to 1%. This, in a race to tackle U.S. inflation, which has reached more than 40-year highs in recent months and whose April results were released this Wednesday, May 11. Read more in cryptocurrency news.
The market expected inflation to remain above 8% in 12 months and was not wrong. The consumer price index (CPI) rose 8.3% in April, above the Dow Jones estimate of 8.1%, the U.S. Bureau of Labor Statistics reported Wednesday. Thus, the cost of living recorded its largest 12-month increase since 1981, when it was 9.4%.
Cryptos fall
The price of bitcoin (BTC), the world's largest cryptocurrency, reached to trade below US$28,000 this Wednesday, reaching a low of US$27,679.99. With these records, the crypto has fallen 27.75% in one month; -34.37% in three months; -55.67% in six months; -38.17% in the last year and -43.08% in one year.
It is worth remembering that in November 2021 bitcoin reached an all-time high of US$69,000, however, its current price is barely half of that record. At around 7:00 p.m. (Colombia time) the cryptocurrency was trading at an average of US$28,800, accumulating losses close to 7%.
In the indicators section of Valora Analitik you can follow in real time the behavior of cryptocurrencies.
"If we look back at what is happening, at the beginning of 2020, when the pandemic was declared, bitcoin dropped 50% of its value, which is happening today, and subsequently, it began its upward path. This makes us think that at some point the trend may reverse", explains Alejandro Beltrán, co-founder and country manager of the exchange company Buda.com for Colombia, in a conversation with Valora Analitik.
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Other cryptocurrencies have also recorded sharp falls in recent days, as is the case of ethtereum (ETH) which this Wednesday reached a low of US$2,005, Binance/Bitcoin (BNB) which was below US$300 or Cardano below US$0.50.
According to Beltrán, these falls occur "in a macroeconomic juncture where crypto are assets that in the short term where investors are leaving high-risk assets and taking shelter in safe assets".
"Economic uncertainty has an impact on this scenario that we have experienced on different occasions such as in the pandemic or in crises in 2016 and 2018, where cryptocurrencies also suffered a temporary downward effect. Most cryptos are positively correlated with bitcoin, therefore, they all end up falling. Some more because, as is the case of the terra stablecoin (LUNA), this parity was not likely to generate liquidity and so it was unable to withstand the oversupply that existed", emphasizes the co-founder of Buda.com.
"In that sense, we see that all cryptocurrencies are going to respond to all these very short-term macroeconomic effects, but in the end we believe that there is no effect on the structural part, at least in the case of bitcoin," clarifies Beltrán.