A slide in cryptocurrencies Monday put Bitcoin on the cusp of the lowest level since 2020 as sentiment took a knock from a wave of monetary tightening that’s set to stretch from Europe to the US this week.
The largest digital token sank as much as 7.4% and was trading at $18,370 as of 7:45 a.m. in London. Ether shed up to 6.6%, struggling to hold the $1,300 mark. Coins like XRP and Polkadot posted heavier losses.
Investors are bracing for volatility from the jumbo Federal Reserve interest-rate hike expected Wednesday to fight price pressures. Higher borrowing costs are sapping the liquidity that the crypto sector relies on. US equity futures were in the red and a dollar gauge pushed higher in signs of wider caution.
The backdrop is such that “in this inflationary environment macro trumps everything,” wrote Antoni Trenchev, managing partner at crypto lender Nexo.
Ether, the second-largest token, was at a two-month low. A jump in the coin since mid-June — spurred by hype around an upgrade of the Ethereum blockchain to slash energy usage — is unwinding now the revamp is done.
An additional token investors received after the Ethereum revamp continued to tumble. EthereumPOW, as the offshoot is known, represents much of the legacy computing operations of the blockchain that chose not to participate in the software update. It was down 40%, according to CoinGecko data.
The XRP token affiliated with Ripple Labs Inc,. was among the biggest decliners, shedding as much as 13.5%. That came amid reports that the firm and the US Securities & Exchange Commission prefer an immediate ruling in a court case over whether Ripple was “reckless” in claiming XRP isn’t a regulated security.
The market value of digital tokens is down more than $70 billion in the past 24 hours to $941 billion — a far cry from the $3 trillion peak in 2021, according to CoinGecko figures. Tightening financial conditions and spectacular blowups at leveraged crypto firms sparked a rout in prices this year.