Bitcoin fell more than $19,000 on Wednesday, approaching its lowest levels for the year as rising concerns about a hawkish Federal Reserve drive investors away from cryptocurrencies.
The world’s largest cryptocurrency sank more than 5% to $18,764 by 01:56 ET (05:56 GMT) – its lowest level in nearly three months. The token is now trading around $1,000 above its lowest level for the year.
The weakness in bitcoin has spread to the broader cryptocurrency market, with the total cryptocurrency market cap dropping below the $1 trillion mark once again. The market has lost nearly $2 trillion so far this year as rising interest rates and rising inflation wiped out most major crypto bets.
Bitcoin’s recent losses come on the back of strong US employment and service sector data, which indicates some resilience in the world’s largest economy.
It also gives the Fed more room to raise interest rates at steep rates. Data from CME Group (NASDAQ:CME) shows that traders are pricing in a more than 70% chance of a 75 basis point hike by the Fed later this month.
Bitcoin and the broader cryptocurrency market have been among the assets hardest hit by rising interest rates, as the Federal Reserve begins unwinding two years of accommodative monetary policy in the Covid era.
Bulk faucets and high liquidity have been the biggest factors behind the impressive rise of cryptocurrencies over the past two years. But with interest rates now rising, investors are hesitant to take advantage of the capital in the space.
Sentiment toward cryptocurrencies has also been affected by a series of high-profile bankruptcies this year, notably at hedge fund Three Arrows Capital and Celsius, the crypto lender.
The recent losses in bitcoin have also led to a significant drop in the profitability of token mining. This sale was spurred by most of the major miners to cover their positions, which led to further losses in the token.