The prices of Ethereum and Bitcoin plunged by over 30% in the past week. It marks a new low for the top two cryptocurrencies. While Bitcoin slipped under $21,000 for the first time, Ethereum slid beneath $1,100 on Wednesday.
With inflation rising across world economies, the S&P 500 fell into the grip of a bear market. Experts warned that dark days are ahead for cryptocurrencies. One expert has dubbed it the Crypto Winter. It is used to denote markets that remain low for extended periods, something that happened in the first quarter of 2018 and the middle of 2020 during the pandemic.
Surging Inflation, High-Interest Rates, Fears Of Recession, And A Weak Stock Market Hits Ethereum Rates
Financial consultants say that Cryptos are trapped in the whims and fancies of the stock market and have been doubly affected by the high inflation rate. While both the Federal Reserve and Wall Street were expecting the inflation rate to peak, it appears set to grow further or at least remain at the same level for quite some time before moving south.
Ethereum and other major cryptos continue to slide as the economy continues to be in the grip of deep uncertainty both at the micro and macro level. An all-around gloomy scenario is being worsened by the uncertainty in the stock market, rising inflation and interest rates, and the fears of another recession on the lines of the 2008 economic disaster.
The figures reveal that the Ethereum network TVL had $87B in deposits, down from $102B a month ago. Thus, there appears to be little correlation between the cool-off in the middle of 2021 following the DeFi Summer and the present downturn in Ethereum prices of 33%.
Given the weak nature of active addresses, investors need to be extra careful when considering the present rate as a market bottom. The next few weeks will put digital assets to test if more rate hikes and a faster pace of tightening are announced. At present, the extreme conditions in the market and updates in Federal Reserve policies continue to exacerbate the state of crypto assets.