The macro market influences the price of cryptocurrencies to a much greater extent in the last few months compared to a year ago. This is no surprise considering that some of these companies, which are heavily involved in the macro market, have also expanded their investments into cryptocurrencies such as Bitcoin. So when the macro environment affected these companies, it affected cryptocurrencies. Even now, the influence continues to hold.
Flow of losses in crypto
In the past week, there have been some major developments in the economy. Fed Chairman Jeremy Powell said that as the government tries to get the inflation rate under control, there will be a lot of “pain” in the market. The market made such bleak predictions and ran with them, causing huge losses across the stock market.
By the end of the week, the stock market had lost $1.25 trillion. In comparison, this number is much larger than the entire crypto market capitalization. The effects of Powell’s speech will continue to be felt, with the Nasdaq losing 4% and the S&P 3.3%.
Total market cap below $950 billion | Source: Crypto Total Market Cap on TradingView.com
The spillover of losses was quickly felt in the crypto market. Cryptocurrency losses totaled around $100 billion over the same time period, pulling it back below the $1 trillion mark. The inflation rate, reported at 2%, didn’t help either. Furthermore, there is speculation that there is a good chance of a rate hike of 75 basis points in September.
Total cryptocurrency market capitalization has now recovered to $931 billion at the time of writing, after hitting a local low of $919 billion in the early hours of Monday.
A look into the future
There has been a slight recovery in the crypto market over the past few hours, but as the trading week opens, there is still uncertainty about which way the market will swing. Powell’s speech came just before the weekend, not giving the stock market enough time to absorb and regulate the news. This regulation is expected to happen this week.
As for the expected increase in interest rates, as before, it is likely to trigger another downtrend as investors pull money out of the market. This trend is already being seen in the crypto market, where large investors are pulling out of digital assets like Bitcoin, leading to double-digit outflows.
September was also a historically red month for the crypto market. A good example is the market crash that occurred in early September 2021. So if the market stays true to this trend, more losses are likely to occur as September moves on.
Featured image from Finance Magnated, chart from TradingView.com
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