The losses that are being recorded in the price of Bitcoin are being modeled by other altcoins as many slumped to levels that are yet to be seen in months.
The price of Bitcoin (BTC), the world’s largest digital currency by market capitalization dropped to its 16-month low on Wednesday as the broader crypto ecosystem has continued to take a beating on sustained bearish sentiments.
The digital currency slumped to $26,350.49 after shedding more than 30% of its value in the past week. Amongst the fundamental factors that have largely affected the price of Bitcoin is the interest rate hike by the United States Federal Reserve.
Bitcoin as an asset has been tagged as anti-inflationary by its biggest supporters and this means the sentiments attached to its accumulation will be triggered when there is inflation in the economy. While this inflation currently persists as a drawdown effect from the coronavirus pandemic and the impact of the Russian and Ukrainian wars, Bitcoin investors are notably reacting to the efforts by monetary watchdogs to taper down this inflation growth.
The inflation readings for April with respect to the prices of goods and services jumped to 8.3%, a figure that is close to the highest level recorded in the past 40 years. The growing inflation is just a basis for the Federal Market Open Committee (FOMC) to double down on its monetary and economic policies to help cushion the rising inflation, and this effort is being considered by risk asset investors as detrimental to the future performance of the cryptocurrency.
Besides these macroeconomic policies, Bitcoin’s price growth is being threatened by the ongoing turmoil in the Terra ecosystem as its stablecoin TerraUSD (UST) has failed to maintain its $1 peg against the US Dollar. The UST reserve is kept in Bitcoin and the Lun Foundation Guard (LFG) tasked with creating the reserve for the UST has billions of dollars worth of BTC to help cushion any form of crisis the stablecoin might face such as the one on the ground now.
The LFG may dump its Bitcoin holdings in a bid to help repeg the UST, a move that may be detrimental to the stability of BTC in the long run. Investors do not want to be caught in this slump, if and when it happens.
Altcoins Reacting to the Bitcoin Price Slump
The losses that are being recorded in the price of Bitcoin are being modeled by other altcoins as many slumped to levels that are yet to be seen in months.
Ethereum traded as low as $1,748.30 overnight and at its current price of $1,926.55, it is still down by 20.7% in the past 24 hours. Terra’s LUNA is undoubtedly one of the worst performers as it has shed off over 99% of its value in just 24 hours. The coin attained a low price of $0.02 on the Binance exchange at the time of writing.
The encompassing dip is a wake-up call for all crypto investors and it is one that regulators will want to use as a basis to intensify efforts to introduce sweeping regulations that will govern the space.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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