In November 2021, bitcoin did not seem to have a ceiling. It reached $68,000 and hit an all-time high that spread to the rest of the cryptocurrency market. That milestone stayed there and the truth is that the price has done nothing but drop since then. It has done this with special force in recent days, and today we are in a radically opposite situation with a bitcoin below $34,000. A wild 50% drop that once again demonstrates the extreme volatility of this and other cryptocurrencies.

interest rates. The United States took a singular decision last week to raise interest rates by half a percentage point (0.50%), a significant increase not implemented since 2000.

The Federal Reserve’s goal is to fight inflation, but the effect was immediate in the stock market, with a significant collapse of already stagnant big tech companies. The Nasdaq100 lost 13% in April 2022 alone, and the cumulative loss so far in 2022 is 21%.

with bubble around. The drop in Apple, Microsoft, Tesla, Alphabet or Meta exchanges brings back the debate about whether we are in another dot com bubble. It doesn’t look like it: The financial results for most of the ‘big tech’, with the exceptions like Netflix, are very positive at the moment and in many cases are expected to continue to be so in the coming quarters.

It’s clear that everything that’s happened in the past two years has jeopardized the situation around the world—the war in Ukraine was another straw that broke the camel’s back—but analysts seem to be pointing more toward a correction. To a “bubble burst” like what happened in 2000.

Cryptos don’t go to her prom anymore. It would seem that cryptocurrencies should go their separate ways, as they are very different products from traditional exchange-traded products, but economic trends are weighing (too much) on the value of cryptocurrencies.

Why? Well, because in recent months we’ve seen that the cryptocurrency market isn’t just attracting small investors anymore: the interest from institutions is growing – Tesla and its investment in bitcoin are a good example – and that puts us in a position for what it is. traditional exchanges have a direct (and correlated) impact on what happens in cryptocurrencies.

The rise in interest rates had a clear impact on the decline of “risky” investments – tech investments, and crypto investments in particular – resulting in a massive drop in the entire cryptocurrency market with cumulative drops of around 15%. In the last seven days, according to CoinMarketCap.

Wait, this might just be the beginning. The United States continues to set the pace, and what happens there has a significant impact on the rest of the world. The unemployment rate is very low, wages are high, and this also affects the fight against inflation: There is already talk of another increase in interest rates of 0.75%, which will invest in riskier assets.

If this happens, both bitcoin and the rest of the cryptocurrencies could be affected. Investors have been in large numbers to avoid problems and sell orders – to take profits or minimize losses. We will now see how these anti-inflation measures work and how investors will react to these developments.

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