Bitcoin fell below $28,000 this Thursday (17), reaching its lowest level since June, the date it began rising following rumors that BlackRock would file an ETF order in the US.
The decline would be related to the US economy. In a text published this Wednesday (16), the Fed expressed concerns about inflation, signaling that it is ready for another rate hike next month.
“With inflation still well above the Committee’s long-term target and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further monetary policy tightening”says the Fed note.
According to the CME’s FedWatch tool, there’s an 86.5% chance the Fed will raise rates again by 0.25% and another 13.5% of an even bigger 0.5% hike, possibly the highest level since the year 2000.
Since Bitcoin’s inception in 2009, interest rates have been near zero for several years. For critics like Nassim Taleb, this was the only reason why cryptocurrency has flourished over the past decade.
Interest rates increase treasury bills and worry Max Keizer
One of the direct consequences of rising interest rates is an increase in US Treasury yields. With a return of about 4.3% per annum, levels are now close to those of 2008 after rising sharply in recent months.
Since such bonds are considered the safest investment in the world, many investors tend to take the opportunity and ignore other assets such as stocks and cryptocurrencies, causing these markets to collapse.
So even Max Keizer, a famous Bitcoin defender who has already ripped up dollar bills, was concerned about the current scenario.
“The rise in interest rates will continue to challenge Bitcoin’s price as more capital flows into high-yield instruments.”
Rising rates will continue to challenge the market #Bitcoin price as more capital flows into high yield instruments. https://t.co/vwZtyou3xP
—Max Keizer (@maxkeiser) August 17, 2023
Finally, Bitcoin already lost 4.2% of its value in August, but it is not alone in this doldrums. S&P500, the index that collects the shares of the 500 largest companies in the US, is down 3.7%, while gold has already posted losses of 3.98% over the same period. In addition, Bitcoin’s trading volume also reached its lowest level in the past five years, indicating potential investor disinterest.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
