In a shocking early morning tumble, Bitcoin fell beneath the $25,000 mark on Thursday, a clear indication that the cryptocurrency sector is feeling the heat from tightening US regulatory measures and the Federal Reserve’s increasingly hawkish tone.
The world’s leading cryptocurrency, Bitcoin, staggered to a low of $24,897 Thursday morning, a 4% dip from its Wednesday standing of $25,930. Not far behind, Ethereum also took a hit, sliding down nearly 6% to $1,636.
These unsettling fluctuations came on the heels of the Federal Reserve’s decision to hold interest rates steady, concluded after its two-day policy meeting. But the calm waters didn’t last, as the central bank indicated more potential interest rate hikes looming on the horizon. The reason? An ongoing battle against inflation that shows no signs of abating.
The Federal Reserve’s dot plot of projected rate moves and Chairman Jerome Powell’s so-called “hawkish pause” sent a shiver through traders. Up until the meeting, the collective assumption was that the Federal Reserve was signaling a close to its rate-hike campaign. The market is now reflecting a 65% probability of another 25 basis-point increase by the Fed in July.
The specter of tighter monetary policy, combined with intensifying regulatory pressures, is taking a toll on cryptocurrencies. Both Bitcoin and Ethereum prices faltered as the Securities and Exchange Commission (SEC) sharpens its scrutiny of the industry.
Top crypto exchanges Binance and Coinbase have found themselves in the SEC’s crosshairs this month. The regulatory authority has lodged complaints alleging both firms are operating illegally in the US and have crossed lines by offering their clients unregulated securities.
The lawsuits form part of the SEC’s escalating offensive against the broader crypto industry. Binance, despite refuting the allegations, acknowledged the situation in a statement last week. Industry insiders suggest these lawsuits could be a game-changer, setting a precedent for the treatment of crypto firms in the US and potentially precipitating a make-or-break moment for the entire crypto sector.