Until last November, digital currencies were still gaining despite an already high inflation rate. This has now changed completely. Inflation and interest rate fears are putting a lot of pressure on the bitcoin. The latest data from the US send the price on a downward slide.
Fears of an acceleration of the interest rate turnaround in the US as a result of surprisingly high inflation continue to weigh on the price of Bitcoin and other digital currencies. One Bitcoin cost a good 3 percent less than the day before at 27,464 US dollars on the Bitstamp trading platform in the afternoon. Since the US inflation data became known on Friday, the oldest and largest cryptocurrency has already lost a good nine percent. The price is thus sliding further towards its lowest level since the end of 2020, which it marked in mid-May at around 25,400 dollars. Other crypto assets such as the number two on the market, Etherum, also came under further pressure in recent days.
In the U.S., the already high inflation rate surprisingly rose further in May to its highest level in over 40 years: Consumer prices increased by 8.6 percent compared to the same month last year. This dealt a further blow to the already depressed mood on the financial markets due to economic concerns. On the stock market, Germany’s leading index, the Dax, slumped by more than three percent on Friday, and Wall Street also fell sharply.
Investors fear that high inflation rates in many regions of the world will soon dampen people’s spending mood, as they simply have to find more money for food, electricity and rent. In addition, a tough stance by the U.S. Federal Reserve to curb inflation could become an additional brake, as companies and consumers are likely to become more cautious about credit-financed investment and spending when interest rates are high.
Meanwhile, bond market yields continue to rise. On Friday, for example, the yield on 10-year U.S. Treasury bonds reached its highest level since late 2018. Rising interest rates often pull down the prices of risky assets like digital currencies in return.
As recently as November last year, digital currencies had still been gaining despite already high inflation. At that time, some market observers saw Bitcoin & Co as a protection against a devaluation of classic currencies such as the dollar, despite the extremely strong fluctuations. The picture has since changed completely. Since its record high of $69,000 in November, Bitcoin has plummeted by a good 60 percent. According to Coinmarketcap, it now only has a market value of $524 billion, followed by Etherum with $178 billion.