Bitcoin Prices Fall Off A Cliff To Hit Lows Since Late July – What Led To These Losses?

Bitcoin prices plunged today, falling to their lowest in more than three weeks as many digital currencies and major US stock indexes suffered losses.

The world’s most valuable cryptocurrency by market cap recorded a sharp drop earlier today, losing more than 5% of its value in less than 30 minutes, figures from TradingView show.

Following this sharp decline, the digital asset continued to push lower, hitting an intraday low of $20,876.80 around 7:00 PM EST, additional TradingView data shows.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

By this point, bitcoin had fallen more than 10% in about 24 hours, and it was down more than 15% from its most recent high of more than $25,000 reached on Aug. 15, additional trading data shows.

Risk-Off Trading

Explaining the digital currency’s latest losses, market observers described an environment of risky trading activity, with both cryptocurrencies and stocks suffering due to investor concerns about Federal Reserve policy.

Central bank officials have raised benchmark interest rates several times this year, and an environment of higher borrowing costs could provide headwinds for riskier assets such as digital currencies.

The analysts who provided input to this article highlighted recent communications from Fed officials, as many of them have emphasized the need to bring inflation under control.

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Fed statements

James Bullard, president of the St. Louis Fed and a member of the Federal Open Market Committee, stated during a recent Wall Street Journal interview that he is considering supporting another significant increase in benchmark interest rates at the next policy meeting in September.

Central bank officials approved a 75 basis point increase in July, after US headline inflation figures hit a 40-year high the previous month.

“We should continue to move quickly to a level of the policy rate that will put significant downward pressure on inflation,” he told the WSJ.

“I don’t really see why you want to drag out rate hikes into next year,” Bullard added.

Mary Daly, president of the Federal Reserve Bank of San Francisco, also commented on the issue during a recent interview with Bloomberg TV, stating that she was open to supporting a 75 basis point increase at the next policy meeting.

Brett Sifling, an investment adviser for Gerber Kawasaki Wealth & Investment Management, emphasized the importance of such statements, noting that “investors hang on every word the Fed says.”

He also talked about how these developments likely prompted market participants to sell their riskier assets.

“With the reiteration of the commitment to lower inflation this week, people probably took the opportunity to relax their positions,” Sifling said.

Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, offered a similar view on the matter.

“Today’s sharp decline is a result of market participants reducing risk following renewed expectations of the FED’s hawkish approach.”

Going forward, investors’ intense scrutiny of central bank communications will continue, predicted Armando Aguilar, an independent cryptocurrency analyst.

“All eyes will be on the Fed’s annual symposium in Jackson Hole, WY next week,” he said.

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.