Threats to multiple asset classes including crypto and stocks
Talking about the Federal Reserve, apart from increasing interest rates, it has also been continuously shrinking its balance sheet since June. It is pulling money out of the financial markets to cool the economy in its fight against inflation. This means that the liquidity from the market is decreasing. This is not only bad for crypto, but it is also not true for other asset classes like stocks.
Bitcoin drops 75% in one year
The bottom line is that these are pretty bad times for cryptocurrencies. The value of the largest cryptocurrency bitcoin has fallen by more than 75 percent in a year. However, on Tuesday, it appeared to trade with an increase near $16,675. During the Corona epidemic, people had invested heavily in cryptocurrencies. The reason for this was the huge liquidity brought into the market by the US central bank. The Federal Reserve brought interest rates down to near zero. But now it has become a thing of the past.
Decreased liquidity in the market
Inflation has risen significantly in recent months. Interest rates are very high and the liquidity in the market is gradually decreasing. This situation is not good for digital assets, because according to experts, people invest their extra money in digital assets.
No relief in crypto even next year
Analysts at JP Morgan say that the Fed’s policies will put a huge pressure on the availability of cash for investment next year as well. Accordingly, the slowdown in global money growth will continue in the coming years as well. Less money means increased risk. That’s why investors are exiting crypto.
slowdown in IT sector
Other sensitive sectors like Big Tech are also facing a similar problem. We are currently seeing layoffs in the IT sector. The reason for this is that this sector is coming under the grip of recession. There is a decline in technology companies like Apple, Alphabet and Microsoft. These companies make up a large portion of the S&P 500. The US housing market industry has also been greatly affected by Fed policy changes.
A positive sign came from China
However, last week China eased Covid restrictions. This has shown a positive trend in the market. The yuan has hit a one-month high. Shares of listed travel companies in Hong Kong also saw a rise. Chinese authorities are trying to end the country’s real estate crisis, which has hit the economy badly for the past year.
Here are the latest prices of top cryptocurrencies
| cryptocurrency | Price (in dollars) | shift |
| bitcoin | 16,846 | +4.62 |
| Ethereum | 1268 | +5.69 |
| tether | 1.01 | +0.06 |
| bnb | 281 | +3.13 |
| dogecoin | 0.08767 | +5.54 |
| Polkadot | 5.96 | +4.8 |
| Shiba Inu | 0.00000916 | +3.50% |
Source: navbharattimes.indiatimes.com
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