The entire crypto market capitalization recently fell below $1 trillion for the first time since February. At the time of writing, the crypto market has a cumulative valuation of approximately $950 billion. The recent tank in cryptocurrencies prices has triggered price levels last seen at the start of the year.
Bitcoin, which dominates the cryptocurrency market, plummeted in the early hours of the day. BTC traded at around $22,000 before falling by over 6%. After losing ground to the bears, ETH, and other altcoins followed suit.
Amidst the price crashes, the fear and greed indicator has also fallen. Bitcoin traders have now tilted more towards the fear side of the indicator than the greed side.
Why Crypto Prices are Falling
The recent fall in price has been linked to the Fed’s interest rate hikes. Typically, the cryptocurrency market responds to changes in interest rates with extreme volatility. According to Jerome Powell, the Federal Reserve Chair, the United States economy will likely experience extreme inflation in the coming months. The expectation stirred the SEC to raise interest rates, which effectively triggered the bears in the stock market.
Since Bitcoin gained mainstream attention, BTC’s price has been heavily linked with price action in the S&P 500. Significant price movements in the stock market can be correlated with the crypto market. To add to the current price dips, major US banks project a more intense recession in the US economy later this year.
The SEC Continues to Fight Crypto Organizations
Another factor that likely triggered a sell-off is the recent actions of the SEC. Earlier today, New York Attorney general Letitia James announced a lawsuit against Kucoin, one of the largest crypto exchanges globally. Kucoin has been accused of trading security in Ether. Although the SEC’s securities classification has been unclear, Letitia James insists that Kucoin should register as a broker-dealer to sell the crypto asset legally.
Notably, the Kucoin exchange is not the only centralized exchange facing the SEC’s heat. Binance exchange has also suffered from the SEC’s effort against centralized crypto organizations. The Securities and Exchange Commission accused Paxos, the issuer of the Binance USD, of illegally issuing a security. Although Paxos Inc. has halted BUSD minting, the blockchain infrastructure platform has vowed to defend the case.
Admittedly, the recent pullback may also be a significant correction for the year. Since the start of the year, Bitcoin and Ethereum traders have been more bullish than bearish. Bitcoin outperformed the S&P 500 and assets like Gold and Silver in January. Technical analysts will now look for significant demand and supply zones. Bitcoin’s price reaction in the next few days will go a long way in determining whether the bulls will continue to party or not.