Jerome Powell, the chair of the board of directors of the Us Federal Reserve has indicated that Bitcoin’s prices are about to experience higher interest rates than earlier expected leaving many investors in limbo over the uncertainty whether this could lead to crypto prices crashing.
Bitcoin is the world’s most popular digital asset in adoption but since its failure to cut its losses, it still remains in the red. This development has been accelerated by the fact that Silvergate, a crypto friendly bank has announced plans for voluntary liquidation of its digital assets dealing a blow to more crypto adoption from the crypto community and its potential entrants.
Recently, there has been a decline in Bitcoin’s adoption owing to the fact that since the digital coin hit the $22 000 market cap, it has not gained any positive traction. Some experts attribute this decline to concerns expressed by the chair of the federal reserve which could lead to crypto owners being in a rush to liquidate their digital assets and in the process cause a crash in the prices of Bitcoin.
With Silvergate bank wanting to liquidate its digital assets, a move like this from a big player in the sector could throw traders and investors off their feet as they try to navigate any potential fallout in the market and make plans to mitigate any losses that follow. Bitcoin still remains in the red and a shift like this will cause a ripple effect across other crypto markets. It has already affected other more stable cyptos including Ethereum, Ripple(XRP), Solana and Dogecoin which have already started experiencing losses.
With persistent inflation in the US, the government it trying to get ahead of the situation and one of the tools at its disposal is hiking of interest rates to curb inflation. Mr Powell, while at his final day in congressional testimony in front of the House Financial Services Committee, suggested the possibility of higher interest rates in the markets.
Though no decision has been made on hiking the interest rates, the stock market already plummeted after the session with the House Committee. He however, indicated that steeper interest rates were still on the table if data from the markets warrants so.
This move has seen Bitcoin prices threaten to fall below the $20 000 market cap, a first in a period of 2 months. Recent economic indicators have shown a better economy suggesting higher interest rates are likely in the race to curb inflation.
The sentiments by Mr Powell have already impacted the US Dollar which has raised its value making cryptos expensive for potential investors hence a decline in their demand. Simple economics dictates that a decline in command leads to a decline in prices while the vice versa is true.
Due to this, in the past 24 hours, Bitcoin prices have fallen by over 1.5%. The price could fall even further with the uncertainty surrounding Silvergate Bank.
Though Silvergate has not yet explained why it is liquidating its digital assets, rumours have it that the bank is facing regulatory issues that force it to make such a decision.
Cryptos are among the fastest growing digital assets in the market place but, shifts like this make investors and potential investors nervous to adopt cryptos more aggressively for fear of losing their money if their investments go south. As a reader, what are your thoughts on this?
