Bitcoin’s price just crashed hard this week. It fell back 2% to $115,255.70, after pushing through a new all-time high of $124,496 just a week ago. Macroeconomic issues are fueling this volatility. Perhaps most interestingly, inflation data has come in hotter than expected, raising doubts about the likelihood of a September Federal Reserve rate cut.
In March, then President Donald Trump revealed plans to establish a strategic bitcoin reserve. This reserve would only consist of bitcoin acquired through forfeiture to the federal government. This new initiative marks a substantial pivot in the U.S. government’s approach to cryptocurrency. We encourage the government to continue pursuing budget-neutral methods to obtain additional bitcoin.
The recent price drop is part of a larger trend affecting the cryptocurrency market, as Ether faced a setback. The digital currency retreated 4% to $4,283.15, after coming within a couple hundred dollars of its all-time high of around $4,800 last week. It was a salient moment for volatility given the crypto market’s recent wild swings. Key index The CoinDesk 20, an index designed to track the prices of all digital assets, fell 3.7%.
Indeed, market analysts were quick to point out how much the inflation data has already shifted the mood of investors. Traders are skittish over the not-so-cool wholesale inflation numbers. These numbers are likely to keep upward pressure on future interest rates and dampen the attractiveness of riskier assets like cryptocurrencies.
Compounding the market’s chaos, over $240 million worth of crypto was liquidated in this short span. Approximately $123 million in long bitcoin positions and $178 million in long ether positions were liquidated as traders adjusted their portfolios amid the shifting landscape.
Despite the steep declines in price, exchange-traded funds (ETFs) that track bitcoin proved remarkable resilience. Together, they brought in net inflows of $547 million for the week. ETFs connected to Ether topped the interest, recording $2.9 billion in net inflows.
In addition, several firms inside the crypto space suffered significant stock drops. For example, Bitmine Immersion was down 6%, SharpLink Gaming decreased 3%. These declines are indicative of larger industry forces, rather than an indictment on the individual organizations.