Cryptocurrency markets are showing a significant price drop today, with Bitcoin falling more than 5% in the past 24 hours. Most other cryptocurrencies followed BTC’s trajectory, with Ethereum plunging 3.8%, XRP 2.33% and Solana 4.38%. What is the cause of this sharp drop?
Why is the bitcoin price falling?
One of the reasons for the recent bitcoin price drop is the interest rate hike by the Fed, which is the largest in decades. The cause of the current interest rate hike is an attempt by the Fed to stabilize inflation in the market, helping to lower prices for Americans.
For those who don’t know how Fed interest rates affect them. In short, the lower the interest rate, the better it is to spend money. The higher the interest rate, the better it is to save money. Lower interest rates help stimulate the economy, while higher interest rates help curb inflation.
Given that inflation is currently at an all-time high of 8.5%, the Fed is considering raising interest rates significantly to curb rising inflation and stabilize the economy.
As mentioned earlier, rising interest rates have a ripple effect that leads to higher rates for mortgages, car loans and credit cards, which will encourage users to save more and slow down their spending. As such, it is no surprise that we see people withdrawing their money from the stock market and cryptocurrency markets, causing the current bearish correction.
Cryptocurrencies follow the evolution of the price of bitcoin
Bitcoin remains king when it comes to influencing the price action of the rest of the cryptocurrency market. When bitcoin goes down, most other cryptocurrencies go down too. This is why we are seeing meme currencies, metaverse currencies, and other projects showing a significant price drop today.
The good news is, you can buy this dip, it could be a great opportunity to open positions in undervalued and undervalued projects that could see significant price growth when the market rebounds. However, the correction may just be beginning, and the price of bitcoin may continue to tumble.