Cryptocurrency prices are definitely starting 2022 in a rather chilly mood. The US Federal Reserve confirmed yesterday that it is considering raising interest rates sooner than expected, sending the stock market and cryptocurrencies like Bitcoin (BTC) plummeting. We take a closer look at this lightning fall.
Bitcoin (BTC) and altcoins prices fall
The vast majority of cryptocurrencies are in the red over the past 24 hours. The Bitcoin price has lost -7% on the day, Ether (ETH) is down -9%, and Binance’s BNB is down -8%. The fall was particularly sharp last night, with BTC hitting $42,600:
Bitcoin price has plunged since yesterday (Source: TradingView, BTC/USDT)
In the top 20 most capitalised cryptocurrencies, the 24-hour drops ranged from -3% for Chainlink’s LINK, to -11% for Polkadot’s DOT and Solana’s SOL.
Bitcoin’s dominance is also at its lowest since 2018: it now accounts for just 37% of total cryptocurrency capitalisation, against ETH which is holding steady at 19%.
How to explain this fall
Bitcoin and altcoins are falling in what appears to be a reaction to two pieces of news. Firstly, the US Federal Reserve announced yesterday that it may have to raise interest rates sooner than expected, in an attempt to control what it sees as too much inflation.
The US central bank wants to end its support measures for the economy in response to the Covid-19 crisis sooner. In reaction to this news, the Dow Jones and the S&P500 fell… apparently taking with them crypto-currencies, which remain correlated to equities at the start of the year.
The other possible interpretation is an influence of the situation in Kazakhstan, which is currently experiencing turmoil. The country is second in the world in terms of hashrate production. However, it has just experienced a massive Internet blackout, in a context of particularly tense social crisis.
As a result, the hashrate of Bitcoin has dropped by more than 12%, which may have influenced the fall in its price, and led to altcoins.
All this seems to have contributed to the fall in cryptocurrency prices. Is a resumption of the bull run a possibility, or are we heading for a bear market phase? Not all analysts agree on the subject, but one thing is certain: the psychological threshold of $40,000 will be crucial if Bitcoin breaks through it again.
