Why is the Crypto Market is Down Today?

In recent days, the value of cryptocurrencies has declined dramatically. The recent rise in interest rates by the Federal Reserve and the country's current high inflation level may be to blame.

The Federal Reserve Board will increase short-term interest rates by 50 basis points to a range of 0.5 percent to 1 percent at its May meeting. 

This is a significant development when US inflation has recently hit its highest level in more than four decades, and April numbers were just announced on May 11.

The financial markets rightly predicted that inflation would continue at or above 8 percent for the next year. 

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) climbed 8.3 percent in April, more than the 8.1 percent increase predicted by Dow Jones. 

As a result, the cost of living grew at its greatest annual pace since 1981, estimated to have increased by 9.4 percent.

The price of bitcoin (BTC), the most valuable cryptocurrency in the world, reached a low of $27,679.99 on Wednesday night. 

According to the data published by CoinDesk, it has decreased by 27.75 percent in one month, 34.37 percent in three months, 55.67 percent in six months, and -38.17 percent in the previous year, and 43.08 percent in one year.

According to CoinMarketCap, Bitcoin's price peaked on November 20, 2101, at $69 000. Despite this $69,000, Bitcoin is selling at a far lower cost. 

At roughly 7 p.m. local time in Colombia, the average price was 28,800 US dollars, representing a loss of over 7 percent.

Additionally, on Wednesday, Ethereum (ETH) went to a low of US$2,005, Binance/Bitcoin (BNB) fell to a low of US$300, and Cardano (ADA) plunged to a low of US$0.50. 

Also, See: Earn 40% on Your Crypto While You Sleep

During the previous several days, the value of other cryptocurrencies has also declined substantially.

In a macroeconomic context where investors abandon high-risk assets and seek refuge in safe assets in the foreseeable future, the phrase "taking shelter in safe assets" is applicable.

Due to prior periods of economic instability, we have seen this situation again, especially during the current epidemic and the 2016 and 2018 crises. 

In such circumstances, cryptocurrency has a temporary negative effect.

Due to the close relationship between bitcoin and most other cryptocurrencies, their prices tend to fluctuate in tandem. 

Because this parity was abandoned without an opportunity to provide liquidity, it could not withstand the existing excess.

Even while we can predict how all cryptocurrencies will react to these very short-term macroeconomic repercussions, we think they will not influence the underlying structure of bitcoin.