Bitcoin briefly fell to its lowest level since December 2020 amid growing interest in cryptocurrencies. Why is this and how it could continue.
Interest in cryptocurrencies such as Ethereum (Ether), Cardano or Solana is high. And that too Bitcoin, the world’s oldest, best-known and most important cybercurrency, remains popular. But over the past few weeks, bitcoin has repeatedly lost huge amounts of value. On Tuesday night, it briefly fell below $21,000. The cryptocurrency has lost more than 11% since the beginning of the month, reaching its lowest level since December 2020. And Ethereum has also fallen significantly lately. The cryptocurrency is temporarily more than 20% lower at $1,200 – its lowest since January 2021.
Why is bitcoin falling?
The reason for this is the growing fear of sharp increases in interest rates in the United States. “Concerns over inflation and the associated fear of aggressive monetary policy from the US Federal Reserve remain the dominant issue,” said crypto analyst Timo Emden of Emden Research. Many central banks are currently fighting high inflation by raising interest rates. For example, the Fed could now raise its key rate by 75 basis points. Non-interest-bearing assets, which also include cryptocurrencies such as Bitcoin, are particularly affected.
What are the consequences of interest rate pressure on Bitcoin?
Crypto companies are under pressure from falling prices. For example, Celsius Network recently halted withdrawals “due to extreme market conditions”. Customers no longer had access to their money. Withdrawals were also not possible on crypto exchange Binance for more than three hours on Monday. The reason: “blocked transactions”. Expert Emden assesses: “In an already confused market phase, such bad news can increase uncertainty.”
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Bitcoin and Co.: what’s next?
After the recent fall in the price of Bitcoin, the currency is said to have recovered: according to data from the analysis company Coinmarketcap, the price was again around $22,500. “Some buyers were waiting for an opportunity to buy,” Sathvik Vishwanath, chief executive of crypto exchange Unocoin, told the financial service. Bloomberg. This is why Bitcoin recovered from its lows. But the delay could only be temporary as retail investors remain uncertain about liquidity, he said. Emden also called the developments misleading: “The latest gains could turn out to be a bearish rally and therefore a flash in the pan,” the analyst comments. However, many experts currently assume that the price will increase over the course of the year. Nevertheless, an investment is considered risky by investors, especially because the volatile price is extremely sensitive to the current situation and the consequences of the current war in Ukraine.
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