Bitcoin fell further below $19,000 on Wednesday, coming close to its lowest levels for the year as growing fears of a hawkish Federal Reserve drove investors out of cryptocurrencies.
The world’s largest cryptocurrency sank more than 5% to $18,764 by 01:56 ET (05:56 GMT) – its lowest level in nearly three months. The token is now trading about $1000 above its lowest level for the year.
Weakness in Bitcoin spread over to the broader cryptocurrency market, with total crypto market capitalization sinking below the $1 trillion mark again. The market has lost nearly $2 trillion so far this year as rising interest rates and higher inflation unwound most major crypto bets.
Bitcoin’s latest losses come on the back of strong U.S. employment and service sector data, which indicates some resilience in the world’s largest economy.
This also gives the Fed more space to raise interest rates at a sharp clip. Data from CME Group shows that traders are pricing in an over 70% chance of a 75 basis point hike by the Fed later this month.
Bitcoin and the broader crypto market were among the worst hit assets by rising interest rates, as the Fed began unwinding two years of COVID-era accommodative monetary policy.
Loose monetary taps and high liquidity were the biggest factors behind crypto’s stellar rally over the past two years. But with interest rates now rising, investors are hesitant to leverage capital into the space.
Sentiment towards crypto was also sullied by a series of high-profile bankruptcies this year, particularly in hedge fund Three Arrows Capital, and crypto lender Celsius.
Recent losses in Bitcoin have also drastically reduced the profitability of mining the token. This has spurred selling by most major miners to cover their positions, resulting in more losses for the token.