The cryptocurrency market slid lower on Thursday, September 21, as investors digested the consequences of comments made by Federal Reserve Chairman Jerome Powell regarding maintaining tight financial conditions and higher interest rates for a longer period.
The price of Bitcoin (BTC) dropped to around $26,600, a 1.5% decrease in the past 24 hours, remaining relatively unchanged despite positive news about the postponement of Mt. Gox-related payments, a source of prolonged selling pressure in the digital asset market.
Ether (ETH) broke below the $1,600 mark and extended its losing streak compared to BTC, reaching a new 14-month low against the leading cryptocurrency.
Cryptocurrency experts even suffered heavier losses. Solana’s SOL, Polygon’s MATIC, Lido’s LDO, and Optimism’s OP all declined by 3% to 5% during the day.
Among the cryptocurrency sectors, the Culture & Entertainment sector defied the decline, rising 1% due to the strong performance of ImmutableX (IMX), the native token of the non-fungible token (NFT) platform.
The sell-off of stocks could drive BTC prices lower.
The Fed is expected to raise interest rates once more this year and cut fewer times in the coming year, which has roiled traditional markets.
The 10-year Treasury bond yield rose to its highest level in 16 years, while the DXY index, which measures the strength of the US dollar against a basket of major currencies, quickly surged to nearly 106, the highest since the peak of the US banking crisis in March.
As a result, the US stock market has experienced a sell-off, with the S&P 500 market index losing 1.6% and the Nasdaq Composite index, which is technology-focused, declining 1.8%.
According to digital asset trading firm QCP Capital, the stock market’s tension due to the Fed’s strict policies could spill over into the cryptocurrency market.
QCP wrote in a market update on Telegram: “The US stock market and rates have broken some very critical levels after this and the reflexive effect can take over and lead to more downside from here.” “This macro move could bleed into the crypto market and push BTC lower.”
Higher interest rates are putting pressure on cryptocurrency companies.
Edward Moya, senior market analyst for the Americas at online brokerage platform Oanda
According to Edward Moya, senior market analyst for the Americas at the online brokerage platform Oanda, higher interest rates will also put pressure on struggling cryptocurrency companies, increasing the cost of their capital refinancing.
He said in an interview, “The cost of borrowing will still remain high, and capital refinancing will be a nightmare for cryptocurrency companies.”