Why is there a cryptocurrency meltdown today?

Web Desk
June 13, 2022

Cryptocurrency markets hit a new low for the year.
The worldwide market cap has fallen below $1 trillion to $977 billion.
Almost every major coin is now worth half or less of its all-time high.

Cryptocurrency markets hit a new low for the year. The worldwide market cap has fallen below $1 trillion to $977 billion, a drop of about 12% since yesterday. This year, the global cryptocurrency market valuation has dropped by over $1 trillion, and nearly every major coin is now worth half or less of its all-time high.

The immediate cause of the crypto crisis appears to be a big sell-off by investors in response to rising inflation fears. Investors are also continuing to avoid riskier assets, which is reflected in the stock markets.

Bitcoin, the largest and most popular cryptocurrency, has dropped to $24,000, while practically other altcoins, beginning with Ethereum, have been losing value since the weekend.

Ethereum is trading at approximately $1238, its lowest level in more than 14 months. According to CoinMarketCap data at the time of writing, Solana has dropped by more than 15% and is now trading around $27.

According to experts, the crypto price drop indicates that investors’ risk appetite is declining. They certainly avoid riskier assets. With all of its risks and volatility, crypto is regarded as one of the most volatile financial tools.

“The crypto market has been under pressure from the Federal Reserve, hiking the interest rates to combat inflation over the past few months. Bitcoin, Ethereum, and most cryptocurrencies suffered losses over the weekend after a broad sell-off following the data showing US inflation hitting a 40-year high,” said Edul Patel Co-Founder and CEO of crypto investment platform Mudrex.

“As investors seem to have panicked, the number of crypto liquidations has been high since Friday. Bitcoin and Ethereum plummeted as much as 7% each and is currently trading at their lowest at US$25,000 and US$1,300. The bearish trend may likely continue in the next coming days,” he added.

While altcoins have generally underperformed Bitcoin, they face additional pressure this time due to anticipated regulatory bottlenecks. According to a CoinDesk analysis, only a tiny number of altcoins are expected to withstand such market changes.

According to Shivam Thakral, CEO of cryptocurrency exchange BuyUcoin, rising food, gas, and energy prices are exerting great pressure on the crypto market, with Bitcoin and Ether experiencing double-digit losses in the last 24 hours.

“After the consumer price index reported the highest inflation since 1981, financial markets across the globe have seen a sharp downturn,” said Thakral.

“The market is expected to remain choppy in the coming weeks and countries around the globe continue to report high inflation numbers. The current dip in the crypto prices allows investors to buy crypto at 2021 prices and we expect the seasoned investors to take advantage of the dip,” he added.

According to Darshan Bathija, CEO of crypto exchange Vauld, most investors are concerned that unless inflation levels start falling soon, the US Fed would have to tighten the screws by raising interest rates faster than expected.