The total market cap of the crypto market has had to collapse again today. This means that across the board, prices are falling. But why today? Is there something going on?
Interest is not reduced
First, investors expect that the US central bank (the Federal Reserve) will not cut interest rates this year. Normally, a lower interest rate ensures that people dare to take more risks with their money. Because that reduction is not currently planned, the urge to invest in crypto has diminished.
The CME Fed Watch tool says there is a 97% chance that rates will remain the same after the May meeting.
Government bonds and gold
In addition, interest rates on US government bonds are rising. This makes these bonds more attractive to investors, because they receive a guaranteed return. This actually causes money to flow away from riskier investments such as cryptos.
This not only applies to government bonds, gold is also doing well. In the eyes of the traditional investor, gold has been seen as a reliable store of value for centuries. Over the centuries, gold has proven not to be tied to the varying economic conditions of a country or region.
Cryptos are actually seen as a riskier investment. Prices are often very volatile, meaning they can rise and fall quickly. In the current economic climate of stagnant interest rates and inflation, investors are currently opting for the security of gold.
Liquidations everywhere
Some traders have even decided to sell their investments, which further pushes the price down.
Data from Coinglass shows that more than $245 million in long positions have been liquidated in the past 24 hours, a quarter of which comes from Bitcoin. In addition, less and less big money is being pumped into Bitcoin ETFs.
So it is mainly the sentiment on the traditional stock exchange that influences the crypto market today.
