Bitcoin fell below the all-time high of a previous cycle for the first time today, surpassing the $ 19,776 level.
The peer-to-peer currency had been struggling to maintain the $ 20,000 level over the past week as liquidation and liquidity issues plagued the market as lenders like Celsius Network fell under extreme pressure.
Bitcoin has lost more than 30% of its value in U.S. dollars over the past week, the highest weekly loss since the start of the COVID pandemic in March 2020, when BTC saw its price drop by 33, 45% for TradingView data. Bitcoin was trading below $ 18,000 at press time.
Bitcoin broke its 2017 all-time high on Saturday, the first time it has fallen below the high of a previous cycle in its history. Image source: TradingView.
As interest rates rise in the United States at the fastest pace in decades, assets perceived as the most risky by professional institutions and investors, including Bitcoin, have fallen sharply, causing a snowball effect on the markets. global.
The Fed raised interest rates by 0.75% on Wednesday, the largest rise in the US central bank system since 1994, as inflation has continued to rise over the past year. The U.S. Consumer Price Index (CPI) for the year ending May 2022 was 8.6% higher than the previous month (8.3%) and represents a new maximum 40 years.
As interest rates rise, the Fed’s balance sheet has begun to shrink. The central bank announced last month that it would begin a period of quantitative easing on June 1, reducing its purchases and asset holdings, a turnaround in policies it had begun years ago.
In particular, Bitcoin has existed so far in a period of growth in the Fed’s balance sheet. Since 2008, at the onset of the subprime crisis, the central bank has begun to aggressively inflate its equity holdings. It remains to be seen what will happen to the P2P currency as the Fed hardens.
Assets held by the Federal Reserve on its balance sheet since the early 2000s. Image source: FRED.