Since last year, crypto has seen a significant increase in its price due to the influence of the macro market. These companies have been heavily involved with the macro market and extended their investments into cryptocurrencies like Bitcoin. These companies were affected by the macro market, and crypto followed suit. This influence still holds today.
Cryptocurrency – Losses flow to Crypto
There have been major developments in the economy over the past week. Fed Chair Jeremy Powell said that as the government tried to get the inflation rate under control, there would be a lot of “pain” coming to the market. Markets had made such dire forecasts, and they followed them. This led to massive losses in the stock market.
On Sunday, $1.25 Trillion in losses had been recorded by the stock market. This number, by comparison, is more than what the whole crypto market has. The effects of Powell’s speech would continue to be felt, with the Nasdaq losing 4% and the S&P losing 3.3%.
Source: TradingView.com Crypto Total Market Capital| Source: Crypto Total Market Cap on TradingView.com
In crypto markets, there was a rapid reaction to the spillover effects from these losses. The total crypto market losses reached $100 billion in that time, which brought it below $1 trillion. It was also reported that inflation rates were at 2.2%. There are rumors that September will see a 75 basis point rate increase.
After hitting an all-time low of $919 billion on Monday, the crypto market capital has recovered to $931 Billion at this point.
Looking to the Future
The crypto market has seen a slight recovery over the past hours but, with trading week starting up, there’s still uncertainty about which direction it will swing. Powell’s speech had come just ahead of the weekend, not giving the stock market enough time to absorb and regulate the news. It is likely that this regulation will take place next week.
The expected rise in interest rates will trigger another downtrend, as investors withdraw money. This is already happening in crypto markets, where big investors have started to withdraw from digital assets, such as Bitcoin. It has resulted in double-digit outflows.
The crypto market has been historically volatile in September. The September 2021 market crash was a good example. As September approaches, it is likely that more losses will occur if this trend holds.
Featured image taken from Finance Magnated. Chart by TradingView.com
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