Markets
Crypto Market Loses $400 Million in Liquidations as US Political Gathering Triggers Sell-Off
Jerome Powell, chairman of the US Federal Reserve
The cryptocurrency industry lost $400 million in liquidation in two days following a major policy meeting held by the Federal Open Market Committee (FOMC) yesterday, which sparked frenzied selling.
The Federal Open Market Committee is a branch of the Federal Reserve and during the meeting it decided to keep interest rates constant.
The outcome of the meeting had a consolidating effect on the cryptocurrency sector, triggering liquidations and influencing the prices of major crypto assets. The price of bitcoin fallen from $70,000 to $66,000 and other altcoins also witnessed a sharp drop in price following the meeting.
The FOMC, in its fourth policy meeting of the year, refused to cut rates, triggering volatility in cryptocurrency markets, resulting in $400 million in liquidation.
Federal Reserve Chairman Jerome Powell explained the reason for the FOMC’s decision by saying that the committee is committed to maintaining the restrictive monetary policy that has proven to be successful.
The news continues after this announcement
The news continues after this announcement
The FOMC decision causes cryptocurrency prices to collapse
The FOMC decision caused the value of various crypto assets to plummet. Bitcoin, the largest crypto asset by price and market capitalization, plummeted from an impressive $70,000 to $66,000. Ethereum, the second largest crypto asset and largest altcoin, plummeted from $3700 to $3400.
Other crypto assets such as Cardano, Solana and Ripple were also affected by the FOMC decision and lost value. All three crypto-assets suffered an 8% price reduction.
The $400 million loss due to liquidations reflects the wave of volatility and declining investor confidence gaining ground in cryptocurrency markets today.
The CPI results raise optimism
There was not only bad news for the cryptocurrency market following the FOMC meeting decision. The release of the US consumer price index results sparked some optimism as the numbers were slightly better than expected. The report showed a year-over-year inflation rate of 3.3% for May, slightly lower than the expected 3.4%.
The United States has adopted a rigorous economic policy regarding the issue of rate cuts. This is a diversion from other Western economies such as the European Union and Canada which have decided to implement rate cuts to combat inflation in their countries.
A survey conducted by Grayscale reveals that 41% of voters are turning their attention to Bitcoin in search of alternatives to address the country’s persistent inflation.
Donald Trump, the leading opposition figure in the upcoming US presidential election, has fully embraced the cryptocurrency industry pledging to deepen cryptocurrency adoption in the country if elected.
What to know
- A federal rate cut is an action by a government financial authority with the goal of stabilizing prices, controlling inflation, and stimulating economic growth. This works because reducing financing costs can stimulate businesses and consumers to invest as well as borrow.
- The traditional financial market was also affected by the FOMC’s decision not to cut interest rates.